US stock trading to be implemented in 23 hours: can the liquidation data be carried?

According to Woofun AI, the US stock market will usher in structural changes on December 6. NASDAQ (NDAQ.US), New York Stock Exchange (ICE.US) Arca, 24X National Exchange, and CBOE (CBOE.US) EDGX will jointly launch a “23 hour x 5 day” trading model.

This move is not simply an extension of the trading clock; it is an attempt to add an overnight trading window from 9 p.m. to 4 a.m. EST in addition to the current pre-market, regular, and after-market periods. The core contradiction is whether traditional US stocks can maintain a deep liquidity and compliant clearing system against the backdrop of insufficient institutional participation when global investors are used to the all-weather digital market. This is not only a passive adjustment in response to global demand, but also an active evolution forced by the normalization of transactions between the crypto market and the prediction market. The key is whether this new mechanism is taking on existing off-market demand or creating a new market structure lacking substantial support out of thin air. Currently, it seems that the focus of the first phase is not on creating new trading volumes, but on integrating scattered overnight transactions into a more regulated and transparent market framework.

The real test, however, is not the physical extension of trading time, but rather whether the infrastructure is capable of supporting institutional-level liquidity when most market participants are dormant. If the problems of fragmented liquidity and high execution costs cannot be solved, this transformation may only become a formal channel for retail investors and overseas capital, rather than an opportunity for institutional capital to pour in.

Demand for overnight transactions has existed for a long time, but its structure is characterized by significant imbalances. Blue Ocean's overnight period covers Sunday to Thursday from 8 p.m. to 4 a.m. EST, while OTC Markets offers a longer window, from 8 p.m. to 7:45 a.m. the next morning. The existence of these alternative trading systems (ATS) proves that investors do have a strong desire to trade US stocks during the Asian and European periods. Demand comes from a variety of sources, including foreign investors who want to trade in local time, US retail investors seeking immediate responses to news, and a new generation of traders adapting to the all-weather digital market.

According to data compiled by Woofun AI, although overnight trading in the second quarter only accounted for 1% of total US stock trading volume, its activity surged 358% year over year, showing a strong growth momentum. However, participants are highly concentrated and institutions are absent: foreign investors account for 37% of overnight transactions, while institutional accounts account for only 7%. What is more noteworthy is the extreme concentration of trading targets. On average, only 15 stocks contributed half of the overnight trading volume in August.

This data distribution reveals a key fact: while there is real demand for overnight trading, there is a lack of evidence of broad institutional participation. The exchange is betting on attracting institutional capital by providing reliable data, competitive execution, and sufficient liquidity. If the order book remains thin, at best, this new period will only formalize existing retail and overseas demand, and will not be able to establish true institutional market depth. Therefore, the quality of growth is far more important than quantity, and the entry or absence of institutional funding will be the core indicator for measuring the success or failure of this model.

The market quality dilemma is mainly reflected in scarce liquidity and high execution costs. The original purpose of extending trading time is to improve convenience, so investors can respond to financial reports, geopolitical events, and fluctuations in overseas markets without waiting for regular opening. However, convenience does not equal efficiency. Fewer participants and a lack of liquidity providers during the overnight period led to a serious lack of order book depth. BlackRock's (BLK.US) analysis of actively traded iShares ETFs showed that the spread between buying and selling during the overnight session was on average nearly 10 times wider than during the regular session.

This data intuitively reflects the sharp rise in transaction costs. For institutional investors, wide spreads mean higher slippage and lower execution efficiency. Weak liquidity can also amplify price fluctuations, making it impossible to support the effective entry and exit of large-scale investment portfolios even though prices are there.

Although overnight markets are still valuable in terms of price discovery — they absorb new information and provide investors with a channel to hedge risk before regular periods — the performance of these functions depends on broader participation. If participants are limited to retail investors and a few overseas investors, the price discovery mechanism will be distorted, and the risk hedging effect will be greatly reduced. Therefore, before “23 hours x 5 days” trading becomes a real institutional trading venue, the market must address the issues of depth of liquidity, transparency in pricing, and consistency in investor protection. Otherwise, extended transaction times will only increase market fragmentation rather than improve overall efficiency.

Infrastructure is under severe pressure, and clearing and regulatory rules need to be restructured to accommodate continuous transactions. Nasdaq's model includes a pause period of 8 to 9 p.m., for processing and rolling trading days, and overnight trading will be divided into two trading days.

This arrangement has a profound impact on settlement, financing, reporting, corporate actions, tax processing, and customer interpretation of statements and market conditions. Cboe's plan highlights its reliance on regulation and infrastructure: the launch requires SEC approval, real-time DTCC and SIP support, and timely distribution of corporate action data. While the NSCC's move to 24x5 liquidation is a necessary step, it is only the beginning of an industry transformation. A continuous market requires a continuous information system. Prices and transactions must be merged when each venue opens, company actions must be distributed before affecting transactions, supervision and suspension must be disseminated across sites, and reference prices must be clear. The SEC proposed in June to repeal Reg NMS Rule 611, that is, abolish the ban on transactional penetration of shares in the national market system, and also repeal Section 610 (e), which involves lock-ups and cross-quotes.

This regulatory adjustment is key because during the regular period, the company operates within the established framework of display quotations, routing obligations, and the best trading quotes in the country; however, the overnight market is thinner and more fragmented, and relies more on each locations' own data. If the existing transaction penetration framework changes, the industry needs to clarify rules for best execution, quotation protection, and venue competition. In an environment where liquidity is scarce and investors are easily exposed to fragmented pricing, the rules must be clearly legible. The market can tolerate a low level of activity, but it cannot tolerate the uncertainty of which price, which trading day, which company action order, or which display offer is bound by a live order.

The future outlook depends on the evolution of data systems and the redefinition of success criteria. Moving towards a “23 hour x 5 day” trading market, the judging criteria should not only be an extension of trading time, but whether the market can still maintain clarity, resilience and accountability during the night. Bloomberg's coverage of the upcoming overnight exchange captures visible changes; the deeper change is that market data must evolve simultaneously. For data providers, brokers, exchanges and infrastructure companies, this means removing the clear “today/tomorrow” boundary. The system must handle trading days, company actions, reference prices, and real-time executable quotes across overlapping periods, and maintain support, monitoring and maintenance coverage around the clock. Nasdaq notes that this is a multi-year industry effort involving exchanges, regulators, and infrastructure providers, requiring greater automation, regional support coverage, reliable failover, and a clearer process for deploying changes during market openings. After two years, success depends not only on the share of abnormal trading volume during an abnormal period.

More critical signals include wider participation, narrower spreads, deeper order books, reduced concentration of a few securities, and consistent and understandable market data in each period. If these conditions are met, “23 hours x 5 days” trading will become a new level in the US market structure; if not, the industry will only create longer trading days, but will not build a better market. This is yet another fundamental reshaping of the US stock market structure following the popularity of high-frequency trading.