Overnight ATSs and exchanges drive evolution of extended market hours in US

Key Takeaways

• Alternative Trading Systems have led the drive towards extended market hours in the US.
• Overnight trading presents market data and operational challenges.
• Sell-sides and vendors need to engage with the growing demand for out-of-hours service.

“24-hour” trading is an ongoing trend in equities markets around the world, as both on- and off- exchange trading venues attempt to differentiate from the competition, offer new trading products/services, attract new investors, and boost liquidity. Although this is a global phenomenon, US markets have been particularly active in driving the trend towards out of hours trading in stocks and shares.

What’s driving the trend towards extended US market hours?

Alternative Trading Systems (ATSs) have led the drive towards extended market hours in the US. These non-exchange venues often attempt to address requirements that traditional exchanges do not. Overnight trading is one niche that ATSs have begun to fulfill. For example, Blue Ocean ATS (launched in 2021) offers a trading session from 20:00 until 04:00 EST, and differentiates itself by providing market data in addition to equities trading during overnight hours in the US.

Overnight trading aims to attract retail liquidity, both from non-US traders (such as those in Asia), and from new demographics (such as younger investors). One key aim is to make equity markets more competitive with new asset classes, like cryptocurrencies.

Overnight equities markets also offer institutional investors a way to respond to news and events in real time, rather than waiting for the regular trading session to begin. A recent example was the out-of-hours announcement of a new AI model by DeepSeek in January, which led to a record level of trading in Blue Ocean’s Sunday night session.

The success of Blue Ocean has led to other players looking to enter the space. These include the OTC Markets MOON ATS, and Bruce ATS, which recently received SEC approval. Following this trend, several US exchanges have also expressed interest in supporting overnight trading. The NYSE announced plans to extend trading on its Arca exchange to 22 hours a day; the new 24x exchange recently received SEC approval, and Nasdaq announced plans to support overnight trading.

Overnight trading poses market data and risk management challenges

The rise of overnight trading presents several issues and challenges for market participants. Market data is a key issue. Over many years, US markets have developed a range of measures to enable trade dissemination and price discovery, but these are all focused on the traditional market hours of 09:30 until 16:00. While level 1 Securities Information Processor (SIP) data is available out of standard market hours, it doesn’t run continuously overnight. In addition, the National Best Bid and Offer (NBBO) is only maintained during the regular trading session hours. This creates potential issues for price discovery; a point highlighted by the Securities Industry and Financial Markets Association (SIFMA) last year in a letter to the SEC. The onus is on venues to work with securities information processors to support effective trade dissemination and price discovery for overnight trading.

There are also wider concerns around risk for overnight market participants. The lack of standard market data protocols makes it difficult to implement risk controls and limits. Overnight sessions also lack the complex risk management regime of the traditional trading day. These include volatility controls, policies on erroneous trades, and ‘fat finger’ checks. Venues, industry members, and regulators need to agree on whether existing in-day rules should apply, or whether new models are needed.

Implications of closing the overnight window

Overnight trading also raises several operational issues and questions. Much of the existing landscape around the US capital markets assumes traditional or extended market hours are in force, with an overnight window that allows for an end-of-day (EOD) operational reset. Industry participants typically use this time to reset FIX connections, generate EOD reports and ledgers, manage clearing breaks or exceptions, and so on. Elimination of this overnight window presents operations challenges.

For example, corporate actions are generally applied overnight, before the beginning of a new trading day. How and when should they be applied for overnight sessions? One potential approach adopted by Blue Ocean is to disallow overnight trading for a stock when a corporate action is pending. There is also concern about trade processing, particularly in the context of shorter settlement cycles.

What clearing deadlines should apply for overnight trades, and is the infrastructure in place to support rapid settlement? Infrastructure providers are beginning to engage with these issues. The Depository Trust & Clearing Corporation (DTCC) recently announced that it plans to extend clearing hours to a 24×5 schedule from 2026, specifically to support overnight trading. This demonstrates the widespread belief among key industry stakeholders that overnight sessions are likely to become a standard feature of the US markets.

Extended support across multiple time zones is a key differentiator

Brokers and industry members face challenges as well. As both retail and institutional investors increasingly demand access to out-of-hours markets, sell-side firms need to consider how to fulfill these requirements. Beyond the immediate need for connectivity to the new generation of overnight venues, is there a need for service models that can support out-of-hours trading? Will US trading/help desks be staffed around the clock? Are new levels of automation and no-touch workflows required? Is there enough client demand for these services to warrant an investment?

Global vendors that have experience in providing extended support across multiple time zones, are well placed to meet these requirements. ION’s extended hours service model for the Fidessa trading platforms support continuous online operation from 15:00 on Sunday afternoon until 21:00 Friday evening provides seamless uninterrupted service for US and global markets. As the trend towards overnight, 24-hour, continuous trading continues, and more exchanges/venues introduce support for the “overnight session”, we expect more firms to adopt the extended hours service model, and expand their business to offer these services to their clients.