Sleepless on the stock exchange
In the present day and age, the next trade is just a quick click on your smartphone away. But not only is that immediate availability enticing, there are also hardly any time restraints on stock-market transactions anymore. Round-the-clock trading is enjoying increasing popularity among individual private investors and reflects the consumption culture of a digitalized society. However, the freedom of nonstop trading has risks and side effects. Whoever favors investing for the long term over short-term speculation should preferably refrain from placing spur-of-the-moment buy orders during sleepless nights and should instead drink a cup of warm milk.
Bell-ringing (now just) for show
Miss Piggy, Robert Downey Jr., Donald Trump, and Volodymyr Zelenskyy – over the past several decades, a variety of celebrities from culture, society, business, and politics have rung the daily opening and closing bell for trading on the New York Stock Exchange (NYSE). But ever since floor trading migrated to the digital realm, if not before then, the old bell-ringing ritual now seems like a relic of bygone times that still continues to this day only as a tradition-steeped staged enactment for television. However, the ringing of the bell in the cradle of American capitalism still serves today as a reminder that (official) US stock trading has a beginning and an end. Apart from a few miniscule adjustments, the current time window from 9:30 a.m. to 4:00 p.m. (New York time) hasn’t changed since the 1950s, not even under the influence of the growing importance of major investors in the western United States. For finance pros on the Pacific coast, the trading day often begins when they are still fast asleep in bed – at 6:30 a.m. But the time limitations on stock trading have increasingly been blurring for some time now. What started around two decades ago with the introduction of pre- and post-trading periods (from 4:00 a.m. to 9:30 a.m. and from 4:00 p.m. to 8:00 p.m., respectively) could soon turn into a continuous trading loop (interrupted only by weekends for now).
23/5 | Almost no time for a breather
Current and planned trading hours
Sources: FT, Kaiser Partner Privatbank
(Almost) nonstop, but not without risk
The US Securities and Exchange Commission (SEC) at the end of last year greenlighted the launch of the 24X National Exchange, which from mid-2025 onward wants to offer continuous stock trading from Monday through Friday interrupted by only a one-hour break each day. The NYSE also plans to massively widen its trading window and is pressing ahead with a 22/5 trading project. New and established exchange and brokerage operators sense enormous interest, particularly among individual private investors. At a time when many businesses would like to see their employees resume spending more workdays onsite on company premises, trading before and after work seems all too alluring to many people. A few online brokers recognized this interest early on. Interactive Brokers (since 2022) and Robinhood (since 2023) by now already allow thousands of stocks to be traded after hours, but not at “official”, understandable prices and not without side effects. Although the risk is constrained because investors can only work with limited orders that set a maximum buying price or minimum selling price, it’s possible that an order gets only partially executed. Moreover, price volatility is high during off-peak hours because only few market participants are active at those times and the resulting illiquidity hinders trading. At the same time, hidden trading costs are also elevated, which is recognizable by wider spreads between bid and ask prices. Another thing not in investors’ favor is that no best-execution rules apply for trading platforms during off-market hours, which means that different prices for the same stock can prevail simultaneously in different places.
The time of day matters | There is adequate volume only during official trading
Average daily trading volume on US equity market, in USD billion (Eastern Standard Time, Q4 2024)
Sources: Cboe Global Markets, Kaiser Partner Privatbank
The weekend Bitcoin rollercoaster
Stocks essentially are relative latecomers to the nocturnal nonstop trading party. Round-the-clock trading has already been an established practice on currency markets since the 1980s. Trading of futures on major international stock indices has likewise been going on practically nonstop since the 1990s. But the financial world entered a new dimension at the start of the 2010s with the advent of cryptocurrencies, the first true 24/7 market. Ever since then, the preeminent cryptocurrency, Bitcoin, has been a speculative asset and at the same time also a quick-reacting risk barometer for economic and geopolitical news flow at any time, even on weekends. Continuous Bitcoin trading is also, in no small part, an experiment in real time on the question of whether it would be a good idea to also open up weekend trading in stocks. It’s an experiment with a negative outcome at least for those investors who seek stress-free relaxation on weekends and whose aim is long-term asset growth rather than short-term speculation. That’s because Bitcoin already has frequently been tossed about like a plaything by news flow, particularly on weekends (see chart).
Easy come… | …easy go
Bitcoin price
Sources: Bloomberg, Kaiser Partner Privatbank
Is Wall Street ready?
The cryptocurrency casino open around the clock is surely one reason why individual private investors desire more freedom also when it comes to stock trading. Their enthusiasm, however, is not unreservedly shared on Wall Street, except by securities exchanges and platforms that expect to do more business. Question marks predominate instead. There’s the question, for instance, of how the daily closing price of a stock – a key reference point for over USD 30 trillion of assets under management in mutual funds and ETFs – is to be determined in a world of 24/7 trading. The fact that clearinghouses are closed on weekends as intermediaries between buyers and sellers also stands in the way of weekend trading unless transactions take place exclusively on a blockchain. And last but not least, who in the already stressed and frazzled financial industry as is wants to toil on weekends, even officially? A market that never sleeps and which compels a substantial part of its workforce to constantly react to the latest market movements is unlikely to be in the physiological and psychological interest of workers and employers. Despite already extensive pre- and post-trading, 80% of all US stock trading these days still takes place during the six-and-a-half-hour time window bookended by the ringing of the stock-market bell. So, the financial industry appears destined for a long while yet to waver between a sense of inevitability about ever longer trading hours and the question of whether they are really necessary.
It’s better to drink a cup of warm milk…
The sensibleness of endless trading is also questionable with regard to its ramifications for individual private investors’ investment success. The possibility to trade at all hours of the day or night tends to encourage short-term stock speculation and to divert one’s focus from a company’s fundamentals. However, if an investment decision is not the result of a rational thinking process but is instead merely a visceral reaction to the latest news or share-price movements, then it is no longer an investment decision. Better Markets, a nonprofit organization that advocates for fairness in the financial marketplace, also has a resolute opinion on the subject: “…investing in individual stocks during off-hours trading is already a risky gamble. And human nature dictates that risky gambles are more popular at night. So, imagine what the consequences would be if stock-market ‘gambling,’ combined with the gamification techniques that induce trading, was available 24 hours a day…we don’t have to imagine the consequences. In 2018, the Supreme Court legalized sports gambling. Sports gambling addiction is now approaching a national epidemic to rival the opioid crisis.” Experience shows that disclaimers warning about the elevated risk associated with nighttime trading are unlikely to be enough on their own to deter bored investors from succumbing to the temptation of spur-of-the-moment stock transactions.
Meanwhile, it has been adequately proven that having more time to trade really isn’t helpful for individual private investors. This is evidenced by extensive data particularly on the US equity market. A study1 from last year, for instance, showed that investors who live west of a time zone border pay 2.9% more in capital gains taxes than their neighbors in the adjacent time zone to the east do. The sizable outperformance by “western” investors owes to the fact that the stock market in New York closes an hour earlier for them (it actually closes at 1:00 p.m. for investors on the US west coast). Since they have a shorter time window for trading stocks during normal office or waking hours, they trade less frequently than “eastern” investors do. Furthermore, they invest less in single stocks and are more invested in equity mutual funds. An analysis conducted by Morningstar likewise shows that the possibility to engage in trading tends to harm more than help investor performance. It found that the capital-weighted return on US mutual funds and ETFs was lower in each of the last ten years than the buy-and-hold return on the underlying indices. The gap between the investor return (on the average invested US dollar) and the index return was particularly wide (2024: 2.6 percentage points) in single stock sectors, a playground for many individual private investors.
Mind the gap | Buy-and-hold beats do-it-yourself
Total return vs investor return (2004–2023)
Sources: Morningstar, Kaiser Partner Privatbank
…and to make use of breaks in the trading action
Greed and fear, but also impulsive, ill-considered trading decisions on the part of investors are the causes of the partially large performance gap. They routinely lead to buying at excessively high prices and to subsequent selling at overly low ones. A study by Georgetown University2 has confirmed that those who take more time to make decisions operate more sagaciously. It found that investors who research companies on weekends have a better nose for good stocks than those who do their researching on weekdays. Stocks in the S&P 500 index that exhibit a higher Google search volume on a given weekend than on previous weekends or in comparison to other companies generally have a better share-price performance. A cool-headed, prudent “Sunday investor” thus operates more successfully than a “Monday investor” does. Those who lack temperance can escape the temptation of incessant trading in a different way. The best means of guarding against overtrading is to not have the possibility to make spur-of-the-moment trades in the first place. Such protection can be implemented, for example, by allocating a larger share of one’s wealth to private-market assets. Although private-market assets in the form of semi-liquid evergreen funds are tradable these days (unlike traditional 10-plus-year closed-end funds), they are illiquid enough to make spur-of-the-moment transactions impossible.
However, breaks in trading are useful not just for individual private investors. In the past, nights and especially weekends heretofore largely devoid of trading activity have also routinely been times during which politicians have drawn up emergency plans. During the 2008 financial crisis, for example, US President Barack Obama and his economic advisors invariably tried to present new solutions always before the chiming of the stock-market bell at 9:30 a.m. New York time. For good reason, the bankruptcy of Lehman Brothers likewise was communicated before Monday morning to allow the markets to digest at least part of the bad news beforehand. In a world of round-the-clock trading seven days a week, crisis managers would be under even more pressure than usual and would not necessarily react in the most well-considered way.
1 E. deHaan, A. Glover (2024): “Market Access and Retail Investment Performance”
2 J. Li, X. Liu, Q. Ye, F. Zhao, X. Zhao (2023): “It Depends on When You Search!”