Crypto trading puts pressure on bourses to open all hours

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Nonstop trading in cryptocurrency markets is pushing traders of traditional assets towards working longer hours — in a reversal of pre-pandemic campaigns by banks and fund managers to shorten opening times for bourses.

Since March last year, Bitcoin and other digital assets have entered the professional investor world, with pension funds and conservative custody banks following family offices and hedge funds into the risky but fast-growing crypto market. Last month, Bank of America acknowledged that cryptocurrencies — now worth $2tn — had become too big to ignore.

As these blockchain-based digital assets have become more closely entwined with stock and currency markets, their influence on them has also been growing. And one potential impact is on trading times.

At the beginning of October, Bahamas-based crypto and currency trading platform 24 Exchange filed an application with the US Securities and Exchange Commission for a licence to run a national securities exchange, in a bid to become the first platform where stocks can be traded 365 days a week.

“Once cryptocurrency trading [became mainstream], people became very accustomed to its unlimited availability, so I believe they will expect such 24/7 trading availability for other assets,” says 24 Exchange’s chief executive Dmitri Galinov.

Bitcoin and other digital currencies trade without pausing, powered by the nonstop hum of powerful computers in vast data centres. Retail investors can buy and sell digital coins any time during the global day, seven days a week. By contrast, stock exchanges only allow trading during set hours five days a week, and currency trading pauses for the weekend, in a nod to the human element in finance.

But Galinov, a veteran of electronic trading in equities and foreign exchange, is now betting that large investors will want to trade stocks and currencies at the weekend just like their retail counterparts — in a move that would make currency markets a 24/7 business, and stretch the resilience of the people who take part.

“Customers are already asking: why can I trade Bitcoin but not Tesla after market hours or on a weekend?” he says.

Working late? Traders are asking why they cannot trade for longer on the New York Stock Exchange © Spencer Platt/Getty Images

However, longer hours are unlikely to be welcomed by professional traders who say the existing regime is already punishing.

In January last year, fund managers and banks campaigned to cut European stock trading hours, arguing that the current 8.5-hour daily window for conducting transactions is inefficient and antisocial. Stock exchanges disagreed and rejected calls to bring European business hours in line with Asia and the US, where equity traders have to conduct their business in a 6.5 hour window.

But opening for longer is not yet on the agenda, either. Sarah Mound, communications manager for Euronext — which operates stock exchanges in Paris, Amsterdam, Dublin, Brussels, Lisbon and Oslo — says the company has no plans to extend trading hours to cover the weekend.

Cboe, the global stock market operator also says that it will stick to its current hours, apart from its EDGX Equities Exchange where the company brought forward opening times to 4am ET in March, from 7am previously.

Foreign exchange markets may move faster. Cryptocurrency exchanges offer trading throughout the weekend for their retail customers, allowing them to trade Bitcoin against the dollar even when foreign exchange trading is shut. That means, during the weekend, crypto exchanges are exposed to the risk of large currency market moves when FX markets open — prices could be out of line with the rate at which they offered services to their clients.

“Friday night prices that brokers are offering . . . don’t reflect the reality of the market,” warns David Mercer, chief executive of LMAX Group, the operator of institutional FX and crypto exchanges. “As cryptocurrency markets gain momentum, and there is increasing convergence with FX, crypto will continue pushing traditional asset classes to innovate.”

A tipping point is some way off, though. According to a report from digital infrastructure provider Copper, the majority of cryptocurrency trading happens during the week in market hours, with just 35 per cent of transactions taking place at weekend and after-hours.

$2tn Value of cryptocurrency market

Cryptocurrency markets are also far more volatile than traditional markets, which explains the demand for nonstop hours as investors often need to exit positions immediately. By contrast, currency markets and equities are much sleepier on the whole and, apart from extraordinary occasions, there are few events that trigger the type of price moves that are normal for digital coins.

Ultimately, however, as cryptocurrency exchanges and brokers grow, their business could push large banks to extend their trading hours for currencies. Chi Nzelu, head of macro ecommerce at JPMorgan says, for now, this is unlikely, but it could change if digital exchanges get bigger.

“Demand is currently limited in the institutional space,” he observes. “We always stay close to clients so we can adapt as trading habits and preferences change, though.”