The financial market is a very complex industry and has many different branches. Some of the directions of the financial market are more in demand, while others are relatively low. This is what defines the market hours all around the world. Because there is not enough demand for markets to be open 24 hours a day, they do not trade around the clock. When there is a demand, they open. Exchanges and brokerages operate like any other company, with hours that are determined by demand.
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Why is not the stock market open 24 hours a day?
The Nasdaq has changed its trading hours from 7 a.m. to 8 p.m. EST to 4 a.m. to 8 p.m. The Nyse is also available for aftermarket and premarket trading starting at 4 a.m. Markets have traditionally been open from 9:30 a.m. to 4:00 p.m. to enhance liquidity and efficiency.
Round-the-clock trading, long seen as a natural and unavoidable next step in an increasingly technology-driven, global market, is not largely viewed as undesirable and unneeded by US traders and exchanges. The explanations vary from the practically limited liquidity due to poor investor demand to the personal. For investors, stocks remain a local market.
A matter of convenience
In the 1990s, when stock exchanges permitted trading outside of the 9:30 am – 4:00 pm, eastern session as part of attempts to fight off rivalry from alternative trading venues such as digital communication networks, the concept of a 24-hour market became an intriguing realm of possibility. Despite numerous boom and bust cycles in the years that followed, it never took off.
The convenience of selling shares at 11 pm after concluding daily duties or putting the kids to bed, might be helpful for amateur or non-professional investors. Thanks to the ability of electronic networks to link buyers and sellers, such as the ECN trading brokers, for example, the necessary physical infrastructure is already in place.
However, the fact why investors can’t trade stocks as readily as they can bank at an ATM is primarily due to low trading volumes outside of typical business hours, which magnifies risks: Markets with a small number of participants are more volatile, and transactions are more expensive.
The New York Stock Exchange and the Financial Industry Regulatory Authority officials declined to comment on 24-hour trading.
Liquidity and trading hours
While buying and selling stocks is more popular among individual investors than trading foreign exchange and bonds, equities still have the smallest trading window of the main asset classes. For most of the week, foreign currency and Treasury trading are open 24 hours a day, seven days a week. Every trading day, commodity and stock index futures can be traded practically around the clock. Individual stock trading hours, on the other hand, are significantly shorter.
Even yet, throughout the normal session, stock trading in the United States remains focused. According to Direct Edge’s Harkins, more than 95 percent of the exchange’s volume is transacted between 9:30 a.m. and 4 p.m., even though the exchange is open on both sides of that time frame.
After-hours trading is sparse for various sons, not the least of which is a lack of demand. Several market-makers businesses that buy and sell the stock for their own account or on behalf of customers aren’t active during the extended hours, impacting supply. If investors from outside the United States trade equities here during the day, liquidity during off-hours may increase, at least in principle. However, this has its own set of issues.
To put it another way, Hong Kong investors may not want to trade New York-listed stocks mostly during Asian days anymore so Americans choose to trade Hong Kong stocks during the American day. Traders point out that trading is most busy during the ordinary business day, even for asset classes other than equities, and that volumes in such markets dwindle throughout the evenings and weekends. Those markets, however, allow investors to trade until midnight if they so want.
Because index futures may be purchased and sold for considerably longer periods of time, investors, particularly institutions, may not see the need for 24-hour stock trading. Because of the expense of manning 24-hour trading, as well as a variety of other human and economic reasons, brokers may not feel it beneficial to stay open past usual hours.