Among the leading stock exchanges in the United States, preparations are on the agenda to make stock markets open 24 hours a day, seven days a week. This step by major players such as NYSE, Nasdaq, CME and Cboe will allow uninterrupted trading beyond traditional market hours. Recent developments have brought the effects of this transformation on market participants and intermediaries into discussion again.
The effects of the new era in the stock markets
Mati Greenspan, founder and CEO of Quantum Economics, argued that continuous trading would benefit individual investors the most. According to Greenspan, with markets closing, brokers had greater opportunity to set prices and earn income from investor losses. He also argued that the influence of a small number of institutions in determining the opening prices increases after big news when the market is closed, and this can sometimes lead to losses.
Greenspan stated that it is easier to control prices when the market is closed, and that when important developments occur on the weekend, serious fluctuations occur in prices at the opening.
The low liquidity environment in stock markets outside of traditional session hours may lead to exaggerated price movements. Joe Dente from the New York Stock Exchange pointed out that price differences widened as trading volume decreased outside trading hours. Accordingly, liquidity limitation in transactions made during these hours may cause prices to fluctuate more easily.
Academic research also shows that price formation processes outside trading hours operate more inefficiently compared to regular sessions. According to a study conducted jointly by UC Berkeley and the University of Rochester, low volume and limited liquidity slow down the reflection of new information in prices.
Allegations of manipulation and regulatory responses
While the continuous transaction model in the stock exchanges is on the agenda, price volatility and potential market manipulation when the market is closed are being discussed again. Joe Dente pointed out that low liquidity could facilitate manipulation and stated that similar risks may also occur during the 24-hour trading period.
A study published by SSRN revealed that some brokerage firms can artificially push prices up by placing and canceling large orders before the opening. Similarly, the US Securities and Exchange Commission (SEC) recently imposed sanctions on institutions that create price volatility with misleading orders and fined Velox Clearing millions of dollars.
Regulatory bodies point to the lack of appropriate control mechanisms, especially outside trading hours. The US Financial Industry Regulatory Authority (FINRA) called for the development of necessary oversight and reporting systems in this area.
Market expert Pranav Ramesh stated that markets are weaker and open to price volatility outside trading hours, and emphasized that small investors may have difficulty finding a reference point. It was stated that during periods when big news occurred while the markets were closed, the price setting power of brokerage firms increased.
Continuous trading on crypto-based decentralized exchanges has rapidly increased transaction volume during recent global turmoil. On the platform called Hyperliquid, which works with blockchain infrastructure, futures trading volume exceeded 50 billion dollars in just one week, and it was reported that the daily income reached 1.6 million dollars. Continuous futures trading based on the S&P 500 index was also started on the platform.
