Hirofumi Takeuchi in New York
The New York Stock Exchange has begun discussing 24-hour trading of U.S. stocks. The rapid growth of off-exchange trading is behind that. An alternative Trading System, ATS, already offers trading services outside NYSE trading hours. High-frequency trading has also expanded, and the share of off-exchange trading in U.S. stocks now accounts for nearly half of all trading. Changes in the competitive environment are forcing the NYSE to make changes.
This spring, the NYSE conducted a survey of market participants regarding 24-hour trading. The survey included items such as the benefits and the possibility of securing staff, and the primary purpose was to gauge market participants’ opinions.
“We’re always trying to find ways for our exchange to remain competitive,” said Cassandra Seier, Head of International Capital Markets at the NYSE. She declined to comment on the survey results or the progress of discussions but told Nikkei, “We are always talking to International and U.S. users to find out what they are looking for.”
The NYSE and NASDAQ are the destinations for new listings in the U.S., accounting for almost all cases. In contrast, the U.S. stock secondary market is increasingly multipolar.
According to data from the Chicago Board Options Exchange (CBOE), the ICE/NYSE group has about 20% of the market. The Nasdaq and CBOE are next with about 15% and 12%, respectively. Meanwhile, the share of off-exchange trading is about 47%, up about ten percentage points from June 2019.
Off-exchange trading includes trading at ATSs and HFTs’ internalization. ATSs are less regulated than national securities exchanges like NYSE.
The stock investment boom during COVID led to a sharp increase in trading by retail investors in the U.S., which in turn led to the rise in off-exchange trading, which eroded the exchanges’ trading shares. If U.S. stocks can be traded 24 hours a day in the same way as crypto assets and forex trading, there is a possibility of capturing the needs of Asian investors to trade during the local daytime.
An ATS is leading the way in U.S. overnight trading. Blue Ocean Technologies provides trading services from 8 p.m. Eastern Time to 4 a.m. the next day. The ATS handles approximately 4,500 U.S. stocks, with an average daily trading volume of close to 50 million shares a night. The first subscriber was Samsung Securities of South Korea, and 40-50% of the trading orders come from South Korea.
Brian Hyndman, CEO of Blue Ocean, welcomes the competition, saying, “We will see the pie increase by adding a competitor like the New York Stock Exchange.” The Tokyo Stock Exchange has a 5% stake in the company, which is also considering extending its trading hours.
There has also been a move toward establishing a new stock exchange that would allow the trading of U.S. stocks almost around the clock. 24 Exchange, a fintech company based in Bermuda, has applied with the U.S. Securities and Exchange Commission to open a national securities exchange in the U.S. The venture investment arm of Point72, a major U.S. hedge fund, backs the company.
Dmitri Galinov, CEO of 24 Exchange, explained Blue Ocean’s growth and NYSE’s consideration that “There is obviously demand” for 24-hour trading of U.S. stocks. He said, “We hope to get the final decision [from the SEC] on the exchange this year.”
Of course, there are numerous hurdles to the NYSE’s 24-hour operation. Gerry Milligan, President of Instinet, said to Nikkei, “Certainly, it will need further investment in the existing technology infrastructure to support it. As a result, both brokers and exchanges will have to increase their staffing levels,” expressing concern about the industry’s cost. The SEC’s approval will be another hurdle.
Original Article: https://www.nikkei.com/article/DGXZQOGN11E9D0R10C24A6000000/
