No, no, no, and no: Overnight trading fails in SIP votes

The securities information processors (SIPs) committees, made up of the Consolidated Tape Association (CTA) and Unlisted Trading Privileges (UTP) Plan, voted yesterday morning on whether to approve four proposals for extended trading hours from 24X National Exchange, Nasdaq, CBOE, and the New York Stock Exchange (NYSE). None of the proposals reached unanimous consensus, according to multiple sources with knowledge of the vote, effectively halting efforts to expand exchanges’ trading hours.

Unanimous consensus is required for all SIP votes, and just one vote against can stall a proposal from moving forward. Sources with knowledge of the voting tell WatersTechnology that NYSE and Nasdaq voted against each other’s proposals. Representatives for Nasdaq, CBOE, NYSE, 24X, either declined to comment or did not respond in time for publication. A spokesperson for the SIPs collective also declined to comment.

In the last few months, momentum around expanding hours in equities has picked up, with market participants citing high demand from retail investors in Asia as a top reason for the proposed moves. In October, NYSE announced its intention to expand trading hours at its Arca equities exchange to 22 hours, and subsequently received approval from the Securities and Exchange Commission (SEC). The following month, the SEC approved an application by up-start 24X, which intends to provide round-the-clock equities trading, to operate.

Earlier this year, CBOE Global threw its hat in the ring with plans to offer 24x5 trading on its EDGX equities exchange. The fourth horse entering the race was Nasdaq, which announced last week that it would also seek to do the same on the Nasdaq Stock Market. (CBOE and Nasdaq have not officially filed with the SEC as of the time of this writing.)

The SIP committees are made up of 20 medallions, held by various exchanges across US equity markets, with some holding more than one. 24X’s application, filed last winter, received an influx of comment letters from the spring into the fall, with trade associations and other exchanges expressing worries over the implications of introducing 24-hour equities trading to the wider market. 

Chief among those concerns was what 24X’s entry would mean for the SIPs, which disseminate information from the exchanges in accordance with Regulation NMS. Under Reg NMS, the SIPs are required to send up-to-date market data and provide a national best bid and offer, or NBBO. The CTA oversees securities information for NYSE and CBOE, while the UTP plan oversees information for Nasdaq exchanges and over-the-counter (OTC) markets.

Sticking points

In two comment letters, the Securities Industry and Financial Markets Association (Sifma) raised questions over whether an exchange operating during these times would be compatible with the current obligation to contribute real-time data to the public feeds. If the SIPs’ hours were not extended, Sifma noted, market participants would have to pay for 24X’s proprietary feeds to participate in the market. Nasdaq had voiced similar concerns in its own letter.

In response to doubts over compatibility, 24X amended its application to indicate it would seek temporary exemptive relief in regard to “the reporting of certain quoting and transaction activity during the 24X market session until the SIPs are ready.” To ensure transparency, data from the overnight trading period that would have been reported to the SIPs will instead be published on the 24X website for free during the exemption period. 

24X also indicated it was working with the SIPs to make necessary changes so they could accommodate the overnight trading session.

Beside the SIPs, there are other important market utilities to think of. The National Securities Clearing Corp., a subsidiary of the Depository Trust and Clearing Corp. (DTCC), provides clearing and settlement in the US and would also need to extend its hours.

Brian Steele, president of the DTCC’s clearing and securities services, said on a panel at this week’s FIA Boca conference in Florida, that the clearinghouse is working toward providing 24x5 clearing in the second quarter of 2026. “There are still some open questions,” he said. “Ultimately, if there’s market demand, we will continue to move more toward a 24x7 cycle. … [That’s] the direction of travel.”

A source familiar with the voting process says the failed vote indicates that there are still outstanding questions for markets to answer if they want to move forward. “The SIP needs to extend its trading hours; it only runs 16 hours a day now,” they say. “Trade reporting does not run overnight; it has to get batched. If it trades overnight, it gets reported at eight in the morning.”

They also point to corporate actions. “Corporate actions would have to be done in an event timeframe and that’s a very thorny issue that needs to be worked out,” they say.

But most importantly, the trading day will need to be re-defined, and that will trickle down to when information can be processed. With different exchanges proposing different timeframes, there is no standard for what that could be. Does the day start at 8 am or 9 am? And will it end at 3 am or 4 am?

Alternative trading systems, for now, may have the upper hand. Blue Ocean ATS has offered overnight trading since October 2021, giving it a nearly four-year head start on the exchanges now looking to break ground, and has stood out among dozens of US alternative trading systems as the lone provider of after-hours trading. 

In December, investment firm Peak6 Investments announced its intention to launch Bruce ATS. The trading venue is being built using technology from Nasdaq with the goal of providing an “enhanced overnight trading solution.”

Ultimately, this is untested ground for markets on the heels of an industry-wide move to T+1 settlement. A source, who asked for anonymity because they did not have clearance to speak for their firm, previously told WatersTechnology that moving to shorter settlement times was very different than moving to 24-hour markets.

“A couple years before, the industry had moved from T+3 to T+2, and it was basically the same plan, just moving again. Everyone was very well-versed in how to do that, and it was very smooth. It’s one of the best industry changes I’ve seen in a long, long time,” they said. “The difference here is it’s something that actually hasn’t been done before.”