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Comment by clickety_clack | Hacker News Reader

24/7 trading sounds like a nightmare. “Your retirement savings crashed 30% because there wasn’t enough liquidity to cover a 3am panic over non-news”.

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The beauty of it, though, is that it would recover almost immediately as systems arbitrage an obviously stupid situation.

But on what time scale? Before a few connected entities make a profit or after?

If you're not trading overnight and there's a flash crash that corrects itself overnight... it's the people who are trading overnight taking money from each other.

Most Americans who invest money don't trade at all. They pay some guy at a bank to do it, and the guy at the bank is exactly the kind of guy who is trading at 3am.

Financial illiteracy will be the end of democracy

There's nothing wrong with not retail trading. In fact, most people shouldn't be doing it.

You missed the point of that comment. Nobody at your bank is trading for you or themselves at 3am.

That's the point.

You think some guy at a bank is trading for you.

In a hedge fund sure

Most people are in simple retirement year funds which have a set algorithm which decides by simply rebalancing to follow an index and appropriately mitigating risk by shifting some assets towards bonds.

There is no one trading on a whimsy. The mutual fund founding documents specify an exact time of day (or times) at which the fund gets rebalanced and it simply follows the algorithm..

The price shocks discussed here will not affect that

It’s easy to forget that “overnight” trading is the middle of someone’s day, somewhere. Generally Asia.

The time scale is at least a thousand times faster than necessary for your retirement savings to be safe.

The problem of investment companies selling stupidly at 3am solves itself as they either learn or go bankrupt. And the counterparties making money off those dumb moves don't need to be 'connected'.

Not if I retire 300 times per minute

Connected is a euphemism for inside trading; someone with knowledge of future actions. With the pedotus giving access via his crypto grift who knows?

I know what the word means.

I'm saying that insider knowledge isn't necessary to make money in this kind of situation, and probably doesn't even help very much. If a bunch of people trade like idiots and cause wild swings when there's no liquidity, you can provide liquidity and make money.

Makes no difference unless you are a daytrader

Milliseconds?

Any overnight mispricing is going to become an arbitrage opportunity for market makers, hedge funds, and HFT firms...whom will then compete with each other to mine that arbitrage opportunity until profits go to zero, solving the market inefficiency and mispricing problem over time (and by over time, I mean like probably the first few nights and then it stops being an issue forever).

In other words, a liquidity-based mispricing that happens consistently every night is going to quickly stop being mispriced since its so predictable.

Extracting value from the market as they do it and leaving everyone operating at normal time/capital scales with less. Or isn’t that what you meant?

Yes, when you correct a mispricing in markets that is a valuable service and you tend to get paid in proportion to the mispricing you correct (this is why markets work so well, they provide dynamic incentives in a decentralized way).

In case you aren't aware, a world outside the US exists on different time zones and also invests in US capital markets.

Having 24/7 trading a massive value-add for the entire world who also invests in US companies, which benefits US companies tremendously given they will continue sucking up the world's capital.

This is yet another reason why global companies will continue going public in US markets instead of their own. Meanwhile Europe will continue struggling to form a capital markets union over the next 50 years while they slowly translate legal documents back and forth to each other in 42 languages, growing the fine dining economy of Brussels more than their domestic economies.

That's one way to think of it.

The other way to think of it is that these parties are essentially middle men who make a cut of the difference whenever someone buys/sells far from market price.

Basically if you mis price something they screw you rather than the counter party who would be interested in taking the other side at market.

I think this is stupid and does not add value, but I don't think it's harmful. It's like the stocks equivalent of a junk flipper.

But that doesn’t matter to your retirement. Don’t sell your retirement at 3am and the liquidity at 3am isn’t your problem.

Do you actively trade on a 401k or other savings instrument or do you leave it up to the bank/brokerage?

In the past, stupid situations on Wall Street have not resolved that way; they've resulted in disasters that cause economic harm to many people in the country and the world. Though sometimes people on Wall Street do make money from those situations.

Of course they have... There have been multiple 'flash crashes' which corrected in seconds.

No, they stop hunt their way to depressed prices where they then buy anticipating the recovery while you closed out your “safe” retirement positions at -15%.

>while you closed out your “safe” retirement positions at -15%

User error

It’s funny and also disadvantages everyone who can’t trade 24/7. Win/win?

You don’t put stop losses on retirement positions. That’s an incredibly dumb thing to do for long term investors.

It’s literally a “sell low” policy.

You use a trailing stop loss. You get closed out 15% down from the top, not 15% down from purchase. The alternative in a 24 hour market is worse — the news of a real event hits and by the time you wake up and respond you’re down 50% or more and the stock isn’t coming back.

This policy change is to hunt profit from a safety mechanism used by retail traders.

It is something that should yield a lot of profit for 24 hour trading systems during a downturn.

You don’t put stop losses on retirement positions, period.

Doing that literally any time in the last 30 years would have been a dumb idea if you weren’t retiring in the next year.

You would have gotten stopped out and then what? What magic crystal ball do you use to decide to get back in?

Look at the violent downturn during COVID. You would have been stopped out and then likely would have taken a loss and missed one of the largest bull markets in history.

Stop losses with or without trading are for day traders.

I'm extremely skeptical about this.

24/7 trading will definitely burn a lot of extra energy in datacenters, make some speculators a little richer, and make a LOT of retail investors nervous…

But what actual real-world problem will it solve?

I for one am skeptical that more liquidity is always good. I think that having achieved $0.01 spreads, we're well-past the point of diminishing returns with high-frequency trading.

Right? Why do we even need all-day trading?

I have seen a once-daily auction proposed, which seems like a sensible approach to me.

That wouldn't be enough liquidity, and also wouldn't solve the problem if the auction happened at a specific time. Day traders would all put in their bid at the last possible moment.

What solves the day trading problem is doing chunked actions at random small intervals (like between 2-7 seconds). Then you can't put your bid in at the last moment because you won't know when it is. So your best bet is to put in your bid when you've chosen a price, knowing that it will resolve within seven seconds or less.

I do see your point regarding timing, but I don't see why daily isn't enough liquidity when, for decades, funds from trades have taken multiple days to clear.

The very existence of holiday weekends shows that it's actually totally fine if you go 72 hours without any trades resolving.

There are whole books on this, but the short summary is that there are infinite times when information can change that would affect the value of a company. Anything less than infinite trading is a compromise where the price is no longer reflective of the value. The bigger the gap in the time, the bigger the gap between price and value.

For example, if you could only trade once a day, let's say a company announces midday that some huge customer has just left their platform. Their price should drop, but without trading it can't. So now everyone knows that their value is lower, but can't do anything about it. So people who own that stock will hold their money and not make other trades, because they know they are going to lose a bunch when trading happens again.

> The very existence of holiday weekends shows that it's actually totally fine if you go 72 hours without any trades resolving.

Trading never stops. There is an entire secondary market that has after hours/weekend trading, and a tertiary private market when that one isn't open. It's just you (and all the other retail traders) who can't trade.

Which if anything proves the opposite of your point. Liquidity is so important that wealthy people set up an entire system to keep trading just so they can still have it.

> But what actual real-world problem will it solve?

I know most Americans don't travel, but are you aware that timezones exist and there's an entire world outside the US that also invests in US companies?

Why do you think global companies want to list in US capital markets instead of their own? Being the world's most desirable capital markets is a massive boon for the US economy and 24/7 trading will only accelerate this trend.

> I know most Americans don't travel, but are you aware that timezones exist and there's an entire world outside the US that also invests in US companies?

Not only am I dimly aware of the existence of these not-the-US places, but I actually live in not-the-US.

I believe I'm dimly aware of the concept of a timezone too, yeah. https://bugs.python.org/issue35829#msg385309

> Being the world's most desirable capital markets is a massive boon for the US economy and 24/7 trading will only accelerate this trend.

So, no downsides or diminishing returns to offering 24/7 trading?

>But what actual real-world problem will it solve?

Having US markets open during the rest of the world's business day.

Okay, what problem does that solve?

Most of the time things will work as they are supposed to and arbitrage will work as a damper. Every once in a while you'll get a self-reinforcing loop and then it will work as an a run-away amplifier.

Or the govt steps in and cancels trades like what happened in the flash crash.

We already have 23/6 trading with index futures. The S&P500 (ES), NASDAQ 100 (NQ), DOW (YM) will sometimes gap up or down on open just to match overnight trading.

but you just don't sell and wait until the liquidity comes in and prices return to normal at 9am, no?

Significantly large fluctuations, even if largely irrational themselves, can cause effects which have durable impacts on value.

Give an example don't leave us hanging. I'm really curious how you can find an example of a temporary market liquidity move turning somehow into a long term adverse event for a company. Never heard of it

Honestly, stocks should trade for three hours a day. 24/7 trading sounds like a win for exchange operators and a loss for anyone else.

Maybe even just a single auction in the afternoon.

one per week should do it.

Honestly what would happen if the stock market didn't exist. It seems like these days the price of stock is so disconnected from lived reality that genuinely confused if it would be all that catastrophic

I hypothesize all dividends, no share value. How would that world look

that makes no sense. companies need capital, that's why there is a stock market. dividends are paid from past earnings, never capital (earnings are only a %age of the value of the capital) and not from higher expectations of the future.

In a perfect world… reality is different, however.

Plenty of companies take on debt to pay dividends, e.g. just before going public.

growing companies generally have capital needs that exceed retained earnings, so paying dividends would by definition increase capital need.

Well we’d go back to an era where private capital owns the world. The public would not be able to participate or benefit from the ownership of companies and share in the prosperity.

Yes, hard to imagine this crazy timeline where private capital rules the world. Totally inconceivable.

"It's not good so let's make it worse"

Cryptocurrencies everywhere.

Private capital doesn't own the U.S.?

BREAKING: Countries other than "U.S." found to be members of so-called "world"

Although I'm not sure what he's on either. Capitalists definitely own and exploit pretty much the entire world, with few exceptions.

I should of used the term "equity" instead of "capital". I meant that the worlds largest companies would no longer be able to be owned by public equity and would only be available to those in the exclusive club of private equity.

I mean the average person already barely has any participation at all, and certainly doesn't benefit from it when their money gets dumped down the toilet because of some widespread financial scams and grifts that repeatedly happen over and over again.

62% of adult Americans own stock.

And how many of those people are actively making decisions about what companies they are investing in instead of blindly putting money into a black box 401k account because they are financially punished for not doing so?

Does it matter? They could blindly buy an SP500 index and benefit greatly (as most Americans do).

Not by choice. Stocks are pushed onto Americans (as well as Europeans, and most people in the West) via their pension funds, advanced savings accounts, and sometimes even their salaries (via options). If normal savings accounts in their local credit union would offer adequate interest rates (and if paying in stocks was outlawed by their unions) stock ownership would plummet. I would be surprised if it would even exceed 2%.

That’s a good thing!

Anywhere else you put money as an investment will barely match inflation.

That feels like a disadvantage by design. In a different (and more fair) economy, investing in government bonds or a savings account in your local credit union would give you a better deal then leaving your money with a global hedge fund conglomerate which in turn invests your money into all sorts of unethical companies, including oil and weapons companies.

Why is it better? It’s not like your government couldn’t use the money to do something unethical. Same with a bank.

Your government is way more democratic then your hedge fund. And I would wager your are in a massive minority (perhaps among my hypothetical < 2% who would own stocks by choice in my hypothetical economy) if you desire your unused money to be spent by Canadian billionaires to further enrich them selves, instead of your government investing in infrastructure, health care, education, etc. or your local credit union lending it to somebody in your community buying their first house, or opening up a new business which you are likely to shop at.

It's not disconnected from reality. You just don't understand it.

If the stock market didn't exist you would have less opportunities to invest in well priced companies and people would be manipulated in investing in opaque, often ridden with accounting shenanigans things like private equity.

The more companies are public and subject to price discovery done by sophisticated players the better it is for uninformed players like normal investors but also less sophisticated informed players like pension funds.

> people would be manipulated in investing in opaque, often ridden with accounting shenanigans things

This happens even with the stock market. See every financial crisis.

Like which one? 2008 crisis was caused by reckless lending by banks as a result of silly regulation (government guaranteeing loans), implicit promise of bailouts and you could argue corruption. What does it have to do with the stock market?

It's a nice dismissing soundbite but you're just missing the broader point and real issues coming with people's money being invested in non public entities.

Besides, just because some problems also happen with solution A doesn't mean they wouldn't be worse with solution B. You are not really making a point just dismissing the idea of a public market without understanding the value of it.

I'd settle for once per second. There's a lot of very fast trading nonsense which I've only heard defended with the "liquidity" bogeyman.

A sealed-bid uniform-price batch auction seems like the right action.

It's your God-given right as an American to get millisecond level price discovery. Trading delays sounds like Communist bureaucracy.

Even once per second seems like overkill. That interval would still largely just facilitate the weaponization of exceedingly low information latency.

30 seconds seems reasonable, 1 minute better, and 5 minutes still better. In all honesty even going as long as 30 minutes should still facilitate all legitimate purposes.

I saw this as a serious proposal somewhere but I can't remember where.

There are exchanges out there that run continuously but with delayed information feeds.

It feels like something Matt Levine would have talked about.

He has

Any references you know about?

One easy pick: https://www.bloomberg.com/opinion/articles/2024-02-28/tradin...

Note that his half-jokey proposal for a total of 30 minutes of trading time a day is at this point a running theme. If my memory serves me correctly, he started talking about this phenomenon in the pre-plague years.

Run continuously, non-delayed, but only sweep the order book at a random time every [1,2) seconds. Run for something like our current extended market hours.

Everyone gets the benefit of fast-enough execution and strong liquidity.

Crazy high-frequency gamesmanship goes away. Smart quantitative plays are still possible.

The best known (at least in the tech circles - in good part thanks to HN and Matt Levine) is probably IEX. The exchange guarantees that every participant is behind the exact same time delay. And they do that by having a sufficiently long spool of optic fibre between the exchange "broadcast switch" and the market maker computers.

Simple and effective. Relies only on laws of physics to create the delay.

There are also exchanges that run with "frequent batch auction" principles.[0]

0: https://econpapers.repec.org/article/oupqjecon/v_3a130_3ay_3...

More than tech circles - it's one of the key parts of Flash Boys (by Michael Lewis [of Big Short, Liar's Poker, etc])

If that were true then nobody would show up to trade during the extended hours and therefore absolutely nothing will change.

And even that seems kind of generous to me. I see absolutely zero value in stock trading continuously for any length of time. Businesses don't make purchasing or investment decisions in that time span, nothing of significant value can even be created or sold or shipped in those time spans.

> “Your retirement savings crashed 30% because there wasn’t enough liquidity to cover a 3am panic over non-news”

I don't understand what that means so I'm guessing it doesn't apply to retirement savings in general. Does "liquidity to cover" imply that one made a bet that didn't work out?

There's already a huge futures market Liquidity will just migrate.

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