The Securities and Exchange Commission’s recent announcement of a roundtable for 24-hour trading indicates a significant milestone in the evolution of U.S. equity markets. The discussion will focus on overnight trading and the opportunities and challenges that could come with expanding trading hours. Although the announcement indicates its early stages of discussion, it signals, as SEC Chairman Paul Atkins describes, that the industry is moving toward “a new day – and night – in the U.S. equity markets”, where regulators and market participants are seriously considering what a more continuous market could look like.
While much of the conversion will naturally focus on exchanges, broker-dealers, trading systems, and market infrastructure, public company leaders should view this development through a broader scope, where, if trading becomes a nearly continuous activity, the implications could extend beyond the trading desk. If investors can trade U.S. equities around the clock, companies may eventually need to consider how they manage information, monitor risk, and respond to events outside traditional business hours.
Traditionally, public companies have been built around fixed points in time – earnings releases, SEC filings, investor presentations, and market disclosures – generally scheduled around established market hours. These established market hours allow for management teams to coordinate communications and prepare for a variety of market reactions.
The shift to 24-hour trading may challenge these fixed assumptions. An example could be a company experiencing a material event at 2 a.m., when the market is open and investors are actively trading. The company may not have the capacity to determine how to evaluate and respond to this material event, and this event would be reflected in the company’s stock price almost immediately. This type of example raises several questions for management and audit committee teams, such as who is responsible for evaluating potentially material information outside normal business hours, how quickly an issue can be escalated, and whether the company has a clear process for responding to an unexpected overnight event.
Although these risks are not new, the timing for addressing and responding to them is.
The U.S. markets remain among the most liquid and attractive in the world, yet are currently only active during normal U.S. business hours. Moving towards 24-hour trading could have a lasting impact on global trading. Continuous trading could make U.S. markets even more accessible to investors in Asia, Europe, and the Middle East without requiring them to trade at inconvenient times, making the investor base more diverse and potentially increasing demand.
The impact may not be immediate, but investor relations teams may need to consider how earnings communications and other significant announcements fit into a market that is no longer defined by traditional opening and closing bells.
The SEC’s upcoming roundtable discussion is still just a conversation about what 24-hour trading could look like, and many operational, regulatory, and investor-protection questions need to be considered before major changes take place. This, however, is an important milestone in U.S. markets, where public companies should consider what such a change could look like. Public companies may find that the biggest adjustment is not simply extending the trading day but rather adapting processes behind the scenes so that management, finance, investor relations, and governance functions are prepared to operate and respond to a market that never fully closes.
For more information on this topic, please contact a member of our team.
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Johnny Minassian Johnny Minassian is a partner providing assurance, accounting and consulting services to investment advisers and private funds. He serves hedge, commodity, private equity, venture capital, loan and real estate funds throughout their life cycles. Johnny has helped grow the Firm’s Financial Services practice in Southern California and is connected to the deal community,…
