Pretty soon you might be able to make a stock trade at almost any time. Late last year, the NASDAQ Stock Exchange asked regulators to approve an overnight trading session from 9 p.m. to 4 a.m. The exchange already allows pre-market trading from 4-9:30 a.m. and after-market trading from 4-8 p.m.
If the overnight window is approved, the market would close for one hour a day (8-9 p.m.).
There are benefits to this. Investors could price overnight news in more efficiently. And overseas traders could trade during their daylight hours.
But the risks are substantial, particularly when it comes to volatility.
Do you plan on trading at 2 a.m.? Most regular investors are asleep. If there’s limited trading, the risk of an overnight session becomes clear.
Liquidity, which is the ability to transact without causing a big change in price, could be an issue. Overnight moves risk becoming a lot more volatile if there aren’t many traders to absorb big orders.
See, the market is faster and more volatile than ever. And plunges especially can be fast and deep.
For instance, it took 25 months for the S&P 500 to bottom after the dot-com bust. The Great Financial Crisis took 16 months. The 2022 bear market lasted just nine months.
Along the way, two rapid-fire crashes happened. One was in 2020, when prices bottomed in less than two months. And then there was last year’s tariff tantrum that lasted four days.
Crashes and bear markets are not what they used to be. They’re quicker and meaner than ever before. Like I said last month, it’s a new market.
Markets open 23 hours a day combined with algorithmic trading could make it worse.
