Blue Ocean Technologies has formed a partnership with Tokyo Stock Exchange as its ATS, which provides overnight trading of US stocks, has experienced a 30-fold increase in volumes this year.

Asian investors can trade US stocks during their daylight hours during the Blue Ocean ATS session which operates between 8PM ET and 4AM ET in the US, from Sunday to Thursday.

Brian Hyndman, president and chief executive of Blue Ocean Technologies, told Markets Media that the firm has been working on the partnership with Tokyo Stock Exchange for seven to eight months. Hyndman reached out to a variety of exchange groups and TSE took an interest in Blue Ocean’s offering for Asian retail investors.

In August TSE announced a strategic partnership with Blue Ocean, which includes the Japanese exchange making a 5% investment in the US firm. TSE will acquire knowledge of US securities market services and rules and also seek to provide Blue Ocean ATS’ customers with opportunities for cross-border trading of Japanese equities.

“They are very excited about the ability to offer Japanese investors the ability to trade US stocks in their daytime hours,” said Hyndman. “Right now, we are focused on Japanese investors trading on Blue Ocean but something we want to explore is offering US investors the same ability to trade Japanese stocks though our platform.”

In February this year Blue Ocean formed a connectivity and market data partnership with Futu Clearing, the US-based clearing and execution subsidiary of Futu Holdings, a fintech offering fully digitized financial services in multiple markets. For the first time Futu could provide clients access to trade US equities in real-time and access market data during Hong Kong local business hours via the Blue Ocean ATS. This added to the partnership that Blue Ocean had in place in South Korea with Samsung Securities.

“We entered Hong Kong, South Korea and now we are excited to get into the Japanese market,” said Hyndman. “We have some interest from Singapore and I think that will start to pick up late in the third quarter and early fourth quarter.”

Volume increase

In June Blue Ocean said it crossed a landmark of 1 billion shares traded since the start of 2023. At the end of last year Blue Ocean traded just under 1 million shares per night and is now close to 30 million shares (double counted) according to Hyndman.

“The increase is driven by Asian retail that want to trade US stocks during their daytime hours,” he added. “On any given night we will trade over 3,500 different single stock names on the platform.”

The rise in volumes has also been boosted by Blue Ocean partnering with other US venues who have expanded overnight trading. In July Interactive Brokers, the global electronic broker, announced the expansion of its overnight trading hours service, which now lists over 10,000 US stocks and ETFs and also connected to the Blue Ocean ATS.

Milan Galik, chief executive at Interactive Brokers, said in a statement: “Overnight trading is an important service that helps our clients make timely trading decisions and capture investment opportunities around the clock. By extending overnight trading to thousands of US stocks and ETFs, our global clients have a greater choice of what and when to trade at almost any time.”

In May Robinhood Markets unveiled its 24 Hour Market, which offers retail traders flexibility and access to the markets 24 hours a day, 5 days a week in partnership with Blue Ocean.

Hyndman added that the partnerships with Robinhood and Interactive Brokers opened the floodgates to a variety of other US brokers who can sponsor their customers from Asian markets. He expects to see an increase in volume from all the brokers on the platform in the second half of this year.

“We have close to 30 brokers trading on the platform, either directly or indirectly, and that is a big opportunity in front of us that we have to execute on,” said Hyndman.

Hedge funds are now joining Blue Ocean as they want to manage their risks 24 hours a day according to Hyndman. He added: “The big institutions have their own processes in place and it takes a while to change that mindset and behaviour.”

Blue Ocean would like to expand its trading hours at some point and Hyndman said the firm will work closely with market infrastructure providers to achieve that aim.

For example, extending trading hours would require real-time reporting and changes to the ATS’s clearing and reporting procedures. The Blue Ocean ATS currently operates only on those calendar days when the NYSE Trade Report Facility (TRF) is open for reporting the following morning. The ATS does not open on Friday or Saturday evenings, because the NYSE TRF is not available for reporting of trades the following day.