Should we regret that Euronext closes its doors for two full days at Easter? For the Robinhood platform, the future stock market is traded 24/7! For real?
The Robinhood stock trading platform, very popular with Americans, recently announced an extension of its hours, allowing the shares to trade between 7am and 8pm (US time), an additional four hours per day. And this would be just the first step to being able to trade futures 24 hours a day, 7 days a week! The platform also writes roughly on its website: “The future of investments is 24 hours a day, 7 days a week”.
According to Robinhood, (young) clients who have discovered the stock market while in jail may have a harder time trading their stock when they get back to work. So, for all early risers and night owls, it wants to offer maximum flexibility.
The debate is not exactly new. About ten years ago, the idea of trading on the stock exchange 24/7 was already in the news. At the time, the US market Nasdaq announced it would open at 4am (US time) versus 7am earlier for its pre-opening phase. In fact, it was up to the Nasdaq to compete with its great rival, the New York Stock Exchange, which was already starting to trade on its electronic system Arca at 4 in the morning.
The rush for the extra long hours was then amplified the emergence of alternative trading platforms. Meanwhile, official exchanges such as Euronext have also abolished several public holidays. Trading, more and more trading …
24/7 trading would be the final step. But I’m not sure if it’s suitable for the average investor.
This year the Euronext markets, including the Brussels Stock Exchange, are closed for only three days (these 15 and 18 April at Easter and Monday 26 December). The abolition of public holidays has not really thrilled the professionals forced to work in markets largely deserted by investors.
Normally, liquidity is already concentrated on some very specific moments, in particular at the opening of the markets. Some professionals had even proposed to reduce trading hours, starting later in the morning and ending earlier in the afternoon. One way to increase liquidity, but also to ensure a better balance between private and professional life and also to attract more women into finance.
But the proposal was rejected. And, on the contrary, the German stock exchange just increased the ability to trade two-hour shares. Finishing at 10pm, Deutsche Börse wants to line up with the Wall Street closing.
The risks of enlargement
24/7 trading would be the final step. But I’m not sure if it’s suitable for the average investor. Experts point out that trading outside normal hours can be significantly riskier: the flow of information is exhausted, transactions become rare and price changes can be very large. “It’s like driving a car in complete darkness,” says a specialist.
This would perhaps delight some speculators who compare the stock market to a kind of casino whose doors must remain open constantly, but is this really the role of a stock market?
So yes, this would perhaps delight some speculators who compare the stock market to a kind of casino whose doors must always remain open, but is this really the role of a stock exchange?
If the platforms want to extend the hours it is above all to earn more and compensate for the drop in commissions in a context of strong competition. Let’s not forget that the official stock exchanges (Euronext, Nasdaq…) and platforms like Robinhood are all listed on the stock exchange. Let’s also not forget that Robinhood sends its stock exchange orders through a company like Citadel Securities, which is a high frequency trading company. This type of company only swears by algorithms and reaction speed.
Faced with these high frequency traders, who already monopolize 50 to 60% of trading in the United States, the individual investor runs the risk of being the turkey of farce in case of extended hours. And, let’s face it, there are other more interesting things to do at 11pm or midnight than “play” on the stock market. So to the question “Do you want to trade with me tonight?” (to parody the lyrics of a famous song …), the answer is no.