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Weekend reading: The city that never sleeps mulls midnight share trading

What caught my eye this week.

Every morning at 9.30am in New York, a bell is rung at the famous Stock Exchange signaling the start of trading.

It happens again with a closing bell at 4.30pm – repeating a routine that’s by watched by almost nobody in the actual business of investing.

Okay, a few hundred floor traders are prompted to think about which route they’ll take home. A giddy CEO from a biotech wonders if they chose a diverse enough team to join them on the platform for the bell-ringing ‘ceremony’ they coughed up for. A retired dentist in Florida watching CNBC growls as yet another day’s viewing has not revealed what sank her 3M stock.

Elsewhere, data whips around the globe. A high frequency hedge fund manager visiting a server farm coughs politely and suggests her cabling could be at bit closer to the wall. A thousand crypto bros ply their trades, day and night. And fund manager in Tokyo curses himself for snoozing through his alarm and missing the US close.

Major currencies and bonds can now be traded all day and night from Monday to Friday.

But US equities can only be traded out-of-hours in a half-arsed fashion – via wonderfully-named ‘dark pools’ if you’re an institution, or even the internal markets of some US retail platforms like Robinhood.

And that isn’t good enough for some people.

Be a part of it

24 Exchange – a startup US trading venue backed by hedge fund manager Steven Cohen – has been looking to take trading 24-hours for years.

Its latest submission is with the regulators. Meanwhile the New York Stock Exchange is polling interested parties about how non-stop weekday trading could work.

The Financial Times notes the survey is being conducted by the New York Exchange’s data analytics team, rather than its management. It seems like a fact-finding foray at this point.

And one can certainly imagine all sorts of technical obstacles – from staffing to liquidity to compliance – that would challenge a stock market rolling along for 120 hours on the trot.

On the other hand, doesn’t it feel sort of odd that we still have set market hours?

The whole show is run by restless machines these days anyway, while cryptocurrencies have given the younger human participants a taste for always-on trading.

Google news stories about the New York poll and you’ll find most of the coverage is from the crypto sites. Not a coincidence.

There’s even an intellectual argument for 24/7 trading.

A stock’s price is supposed to reflect all known information about that company and its future cashflows.

But if an earthquake happens in San Francisco on Monday evening, say, a US company’s price is basically a stab in the dark until Tuesday morning.

Investors who want to react to the news cannot do so – except via overseas proxies, the futures market, or those alternative trading venues I mentioned. All of which have their own issues.

It’s up to you New York, New York

Whether reducing these ‘blind spots’ in pricing overnight – and even, conceivably, at weekends – would produce more accurate prices overall is an open question.

Already out-of-hours markets are bedevilled with illiquidity and glitchy pricing.

Long-time commentator Felix Salmon warns “off-hours markets can be treacherous places for investors” and reckons any 24-hour equity market would be a ‘casino’.

Writing on Axios, Salmon also notes that institutions already do most of their share trading around the market’s open and close, when liquidity is greatest.

So most of them wouldn’t want anything to do with buying Tesla shares at 1am on a Wednesday.

That would make official nighttime trading the domain of retail punters – and of those who’d prey on them.

Which probably wouldn’t end well for the punters.

“As any casino will tell you, risky gambles are more popular at night,” Salmon concludes.

Contrarily, some European insiders are discussing actually reducing trading hours on the continent. European trading hours are currently two hours longer than the six-and-a-half hours seen in the US.

The aim would be to shore up liquidity, rather than spreading it even thinner over a longer trading window.

These little-town blues

Where any of this would leave the poor old London Stock Exchange is anyone’s guess.

For many decades London profited from being in a convenient timezone between Asia and the US continent – as well from its ultra-close proximity to Europe.

Would London have more or less relevance in an always-on trading world?

Are we anyway on a path to one exchange – in New York, which is already home to around two-thirds of global listed equities by value?

Who knows, but in the meantime the London market’s struggles continue.

This week we saw DarkTrace, Tyman, and Hipgnosis agree to bids from overseas acquirers. The £2bn drug maker Invidior also confirmed previously mooted plans to move its primary listing to the US.

All in a day’s work for the shrinking LSE.

AJ Bells’ investment director Russ Mould warns the volume of firms being snapped up means “the UK market is experiencing death by a thousand cuts.”

Still, it’s an opportunity to profit if you’re an active investor. At least it is if you can figure out what’s truly cheap and/or potentially attractive, versus what’s a conked-out value trap. (Harder then it looks.)

Needless to say, passive investors owning global trackers can ignore all this noise with a wry shake of their heads – and then continue to go about their business of compounding their long-term gains, regardless of how and when the underlying shares are traded!

Have a great weekend.

From Monevator

Fancy a short duration index-linked gilt fund to guard against inflation? – Monevator

From the archive-ator: How to save money on travel – Monevator

News

Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.

Homeowner pain as major banks hike mortgage rates – BBC

Charles Schwab eyes UK rollout for US-domiciled ETFs [Search result]FT

UK rejects talks on EU-wide youth mobility scheme – Yahoo

IG Group faces criticism after clients hit by refunding errors – Shares

Pensioners’ fears over paying income tax – BBC

Paragon Bank reveals the top ten buy-to-let hotspots – This Is Money

London leaseholders told they face costs of up to £99,000 each – BBC

Many UK adults unwilling to travel to Europe under new entry/exit scheme – Euronews

KPMG UK cancels foreign graduate job offers after tighter visa rules… [Search result]FT

…rules that campaigners say penalises couples – BBC

Products and services

The pros and cons of Monzo’s new paid-for accounts – Be Clever With Your Cash

Can long-term mortgages help solve the UK’s housing crisis? [Search result]FT

Sign-up to Trading 212 via our affiliate link to claim free fractional shares worth up to £100. T&Cs apply – Trading 212

Blackrock is trialling a product to deliver paycheque-like income from a retirement portfolio [US but relevant]CNBC

How does Co-Op Bank’s new 7% regular saver account compare? – Which

Outfox The Market’s new energy deal 13% cheaper than Ofgem price cap – This Is Money

Open an account with low-cost platform InvestEngine via our link and you could get up to £2,500 as a cashback bonus (T&Cs apply. Capital at risk) – InvestEngine

Aviva launches free pension tracing service – Which

Six questions to ask before taking out private medical insurance – Which

One year with a Tesla Model Y – Mr Money Mustache

Urban flats for sale, in pictures – Guardian

Comment and opinion

Join the investor class as soon as you can – Downtown Josh Brown

Is it too late to invest in the gold rush? [Search result]FT

All about the quest – Humble Dollar

Are you an investing historian or a futurist? – Morningstar

Risk seeking versus risk mitigating – Collaborative Fund

Large cap US growth dominance is mostly a multiple expansion story – Morningstar

Why do people make ‘bad’ financial decisions? – Of Dollars and Data

Volatility is a necessary evil in the stock market – A Wealth of Common Sense

Should a retiree keep paying life insurance premiums? [US but relevant]Oblivious Investor

Diversification is a negatively-priced lunch [Podcast, nerdy]Flirting With Models

Naughty corner: Active antics

Even ‘forever’ stocks have a shelf life – Micro Cap Club

Accounting numbers and cash have to add up…eventually – Capital Gains

Hedge funds have done better than we thought, but there’s catches – Alpha Architect

Retail investors trade riskier ETFs too much – Klement on Investing

How’s the private equity winter looking? [Search result]FT

Risk parity has underperformed for years – Bloomberg via F.A.

Kindle book bargains

How to Read Numbers by Tom Chivers –£0.99 on Kindle

The Dip: Knowing When to Quit by Seth Godin – £0.99 on Kindle

The Pathless Life by Paul Millerd – £0.99 on Kindle

The Deficit Myth by Stephanie Kelton – £0.99 on Kindle

Environmental factors

Conservation slows biodiversity loss, scientists say – BBC

High prices blamed for heat pump installations running behind target – This Is Money

What the heck is seaweed mining? – Hakai

‘Huge disappointment’ as UK delays bottle deposit plan and excludes glass – Guardian

What happens after your country runs on 99% renewable electricity? – The Verge

Birdsong no longer signals the onset of spring in Cambridge – Guardian

Robot overlord roundup

Daniel Dennett: “Civilisation is more fragile than we realised”BBC

AI is the end of the web as we know it – The Atlantic [h/t Abnormal Returns]

Technological risks are not the end of the world – Science

Looking for AI use cases – Benedict Evans

‘Miss AI’ is billed as a leap forward, but it feels like a step backwards – Guardian

Age appropriate mini-special

Ages of the people we marry [Interactive]Flowing Data [h/t Abnormal Returns]

More life advice from a super-smart septuagenarian – Kevin Kelly

Dollar cost average into your health – A Teachable Moment

The surprising data behind super-centenarians [Search result]FT

Retirees are racing against the clock – Humble Dollar

Man, 110, has simple tips for a long life – Today

Off our beat

Hyperphantasia and the quest to understand vivid imaginations – Guardian

Discipline is underrated – Raptitude

The ‘holiday paradox’: how to slow down time – Life After The Daily Grind

No one buys books – The Elysian

The Silicon Valley gold rush started with… a gold rush – Asterisk

Who should pay when space junk falls through your ceiling? – NPR

“You can even kill them”: the UN and the rise of Singapore – Global Developments

How $61bn in US military aid to Ukraine will flow through the US economy – Yahoo Finance

The 80% solution – We’re Gonna Get Those Bastards

Countries with the largest happiness gains since 2010 [Infographic]Visual Capitalist

And finally…

“Philosophy and theology give you the perfect background for investing. To succeed at investing, you need a philosophy. Then you’ve got to pray like hell.”
– Shelby Collum Davis, The Davis Dynasty

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The post Weekend reading: The city that never sleeps mulls midnight share trading appeared first on Monevator.

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