It is perhaps a calming influence. Companies can release results after the close, and everyone gets to think on it overnight. In a logarithmic sense, the market's 33% uptime is quite close to 100%, and it allows for a rhythm, maintenance, and reflection that would be lost to continuous trading.
Most animals sleep, and we've even evolved the seven day week. Perhaps it's a good thing.
If you take the opposite view, someone will always trade with you after hours at the right price.
And those after/pre market hours are only 4-6 hours.
A another solution would be a single auction a day, and everyone would get more fair but less timely trades. And a lot of the goofus mechanics around high speed continuous auction would disappear.
It is a trade off.
There was a ton of volume in both the futures and the pre-market, but it was still dwarfed by all the activity at and just after the open. Most people just don't want to trade until other people are trading, so there's this sort of feedback loop that drives volume to the open.
Technically, there's no reason that the markets can't participate 24/7, but the Nasdaq operates from 4a to 8p, and the crash that occurs at 9:30 still occurred despite markets being available for participation between 4a to 9:30a.
The problem is already somewhat apparent: During the trading day the volume changes and a lower volume increases price impact. It seems logical that longer days spread out the volume even more, thus increasing price impact of orders.
Discrete markets are, under certain circumstances, more efficient at connecting buyers and sellers than continuous markets. It's similar to how an eBay auction is a more efficient way to get the best price for your rare item rather than having a continuously open market where you have to keep deciding whether or not to accept people's lowball bids.
Why do we want efficient transactions? If it's for the benefit of the buyers and sellers, why shouldn't they be given the choice? It's as if we were saying that the stock market is for less sophisticated users than eBay!
EBay doesn't have the same kind of clearing houses and broker-dealer regulations that would make sold items be anything like stock shares, even if they were all brand new and retail packaged.
And then you obviously close it for 63000000 ms each day.
More algorithms are trading around the clock though, since markets are more interconnected than ever. To trade effectively, you need to be more aware of what has happened since market close as well. More explicitly, instruments have global presences.
Running and maintaining systems, and trading 24/7 would be a major shift for a lot of institutions though. So, my guess is that it once an ATS can get approval to start trading continuously, outside human hours, the rest (including exchanges) will need to adapt.
http://www.marketwatch.com/story/a-brief-history-of-trading-...
I used to work for a forex broker (forex is 24h a day) and we had offices in different timezones (Toronto, New York, London, Singapore) so we would always have trader coverage without requiring night shifts.
Not very good reasoning. It's not exactly on point, but I'm reminded of a quotation from G. K. Chesterton:
> In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, “I don’t see the use of this; let us clear it away.” To which the more intelligent type of reformer will do well to answer: “If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.”
I mean, this is Hacker News. We discuss all day about what should or shouldn't be done. If you want action, go out and do it. Otherwise, we're just armchairing all of this.
Sure it does. Why should Chinese investors only be able to trade US equities from 9:30pm to 4:00am?
There's not actually so much new information coming out throughout the day that the market needs to update prices on a sub-second basis for hours and hours every workday.