This article discusses the potential shift towards a 24/7 trading model in capital markets, drawing parallels with the continuous trading of cryptocurrencies. It explores the implications of this change for investors,particularly retail investors,and for stock exchanges themselves.
Here’s a breakdown of the key points:
The Appeal of continuous Trading:
Attracting Younger Investors: The article suggests that continuous trading might be a marketing strategy to appeal to younger investors accustomed to the 24/7 nature of cryptocurrencies.
Logical Step: Given the nonstop trading of currencies and crypto, a continuous stock market seems like a logical progression.Concerns and Challenges:
Real Utility for Ordinary Investors: Petr Žabji questions the actual utility value of continuous trading for the average investor, suggesting it’s a 50/50 proposition at this point.
Investor Stress and Rash Decisions: Kovařík warns that the constant availability of the market could lead to stress and impulsive decisions for small investors who need to be “constantly ready.”
Need for New Systems: Žabji highlights the need for fundamental changes to the trading system,as the current two-day settlement period is incompatible with continuous trading. This involves re-engineering the entire chain from trade closing to money and securities transfer.
Impact on Smaller Exchanges: Vávra believes continuous trading makes more sense for large global markets. For smaller exchanges like Prague, it could lead to extremely low volumes outside core hours and possibly more “handling” than real benefit for investors.
Liquidity Concentration: Kovařík points out that even with continuous trading, liquidity would likely remain concentrated around opening and closing auctions, offering little advantage to retail investors.
Potential Benefits and Inevitability:
Increased Market Attractiveness: For exchanges like the London Stock Exchange, considering continuous trading might be an effort to boost attractiveness, especially in the wake of Brexit’s impact on foreign investor interest. Adapting to Investor Demands: The article suggests that the shift is driven by the advent of Generation Z,pressure for digitization,and investors’ desire for constant access to their investments.
new Standard: The article concludes that a stock exchange without breaks is likely to become the new standard, rather than an exception.
Expert Opinions:
Petr Žabji: Believes the real utility for ordinary investors is unclear (50/50) and that the impact on most retail investors will be neutral.He also emphasizes the need for fundamental system changes.
Kovařík: warns of the potential for stress and rash decisions for retail investors and notes that liquidity will likely remain concentrated around auctions.
* Vávra: Thinks continuous trading is more suited for large global markets and could be detrimental to smaller exchanges. He sees it as a potential duty rather than a competitive advantage for many exchanges.
the article presents a nuanced view of the move towards 24/7 stock market trading. While it acknowledges the potential to attract new investors and adapt to changing demands, it also raises meaningful concerns about the practical implications for retail investors and the necessary systemic changes required for such a transition.
