Overnight trading in the US
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Ali Curi: Markets ConversatION is an ION podcast where we discuss topics of importance to capital market participants with product owners, subject matter experts, and industry leaders. 

Douglas Craig: I think what you're seeing now is clearly the innovation, but I think in order to have a truly overnight marketplace, widespread participation across ATSs, institutions, hedge funds, electronic trading, retail investors, I think that really for the exchanges to participate, there's probably gonna be the need for some regulation and some rule setting. 

Ali Curi: Hi everyone and welcome to Markets ConversatION. I'm Ali Curi. On today's episode, we're discussing one of the most talked about developments in equity markets, overnight trading in the US.

As global market activity expands and investor behavior shifts, the traditional trading window is no longer enough. Alternative trading systems or ATSs are stepping in to extend access, enabling trades to happen well beyond the closing bell. But are we ready for a 23/5 or even a 24/7 market? What happens to the infrastructure built for a market that used to sleep?

Joining us today is Douglas Craig from ION Markets, who will help us unpack the trends, the tensions, and the tech behind the overnight trading. There's a lot to discuss, so let's get started.

Doug, welcome to the podcast. 

Douglas Craig: Thank you. Thanks for having me. 

Ali Curi: Before we get to our conversation, Douglas, tell us a little bit about your background and your role at ION.

Douglas Craig: Sure. I started in Wall Street about 30 years ago. I began as an equity trader, worked on the buy side and the sell side for a number of years. I transitioned to financial technology in the mid 2000s, and I joined Fidessa in approximately 16 years ago in 2009.

Today, I run the US product management team. We oversee trading platform leveraged by nearly 80 US broker/dealers, we interact with those customers on a daily basis and guide them along. Lots to do, very busy world these days for sure. 

Ali Curi: Well, let's start with the big picture. Doug, can you walk us through the current state of overnight trading in the US?

What are some notable trends that you're seeing among ATSs and exchanges? 

Douglas Craig: Sure. I would divide the current state into two broad categories. First one being the US ATSs, Alternative Trading Systems, that support overnight trading. There are three, and they run very similar trading sessions from 8:00 PM until 4:00 AM. They take limit orders only. They trade a subset of the US equities. The most highest profile, high volume exchange listed, Reg NMS exchange listed stocks, the most popular, and they have built in risk management protocols, trading bans, and things that they honor. Great example of innovation in the US markets competition.

I got a call nearly five or six years ago from Blue Ocean when they wanted to integrate with Fidessa and they were exploring this model of the overnight world and really catering to the activity that would go on in that place. So three ATSs; Blue Ocean, the OTC Markets: MOON ATS and Bruce ATS, all running that 8:00 PM to 4:00 AM session.

The second category is the US exchanges. There's been a number of announcements and SEC proposals and requests for SEC approval for the exchanges to widen their trading hours. The most notable is the ARCA exchange applied to run from 1:30 in the morning until 11:30 PM at night. I think approximately those hours are 4:00 AM to 8:00 AM, 8:00 PM now.

And there was also another, new exchange, that applied for SEC approval and got approval for regular trading hours, but also desires to extend into the overnight hours. I think the big challenge with the exchanges is that there are a lot of formalities and things that need to happen. There needs to be market data dissemination during the extended period. There needs to be perhaps additional rules and disclosures and things about what happens during that overnight trading period, and I think that they're gonna be a little bit behind the ATSs in terms of their time to market and things like that. 

Ali Curi: Where would you say the US fits in all this? Is the US catching up to global markets on this front, or is the US setting its own path? 

Douglas Craig: I think that globally, the notion of a broker operating in multiple markets and running a trading platform, operating its business, servicing its customers on a really 23x5 model from Sunday afternoon until Friday evening. I think that proliferates across the globe in terms of the demand and the brokers that wanna do that. I think that a true exchange or ATS or trading session during the overnight hours, I think the US is ahead of other parts of the world in that. I would say US markets, equity markets especially, extremely competitive.

A lot of innovation, and I think you're seeing that now with this trend towards overnight trading and really some real proposals and actions being taken. Not just by the ATSs to run that from an operational standpoint, but with the exchanges not far behind and their SEC proposals and things like that. 

Ali Curi: Right, it's always about longer hours and faster. What is fueling this momentum? Why are alternative trading systems leading the charge into extended trading hours? What investor needs are responding to that maybe traditional exchanges haven't prioritized before? 

Douglas Craig: I think that ATSs clearly have more flexibility to run an exchange during the overnight session is a little bit different than running an ATS during the overnight session.

For example, the three ATSs that are running now, they don't have to print last sale information in real time. There are trades that take place during their entire session, 8:00 PM to 4:00 AM. All those trades are publicly disseminated, they're reported to the tape, if you will, at 8:00 AM the next morning when the TRF opens.

That's well within the rules for off exchange trading that ATSs do. And to the letter of the law, there's nothing wrong with that. I think for an exchange to run during that overnight session, I don't think they have that leeway. I think you need to tackle things like BBO data, best bid and offer data, last sale data, public dissemination of prices, and last sale information. Really uphold the integrity of the markets. I think that the ATSs have been allowed to be that first mover given their innovation, given their kind of unique approach to handling that, and I think that they're responding to some real demand that's out there globally and really just fulfilling that need.

Ali Curi: Are these moves more about retail demand or institutional flexibility, or is it a little bit of both? 

Douglas Craig: I think that it's primarily driven by retail demand and we'll likely talk about that a bit more in a second. But I think when you have the retail interest, you have liquidity right now, either liquidity seekers, liquidity providers, individuals from anywhere who are willing to trade during that overnight period.

I think the natural follow on is going to be additional interest by hedge funds, by trading bots, by automated trading, maybe algos, proprietary algos, and really people that are more event driven and want to react to news, want to be first movers and see liquidity that exists in the marketplace during off hours, during the overnight session, and they're gonna take advantage of that.

What was it? The court filed last week about Trump's tariffs and said they can't do that. That was, I think at 8:00 PM or something like that. So I do think you're gonna have, especially in today's news and it's so easy to get news and obtain information that people are gonna react to it. So I wouldn't say the institutions are driving it right now, but I don't think they're left with a choice but not to participate.

Ali Curi: Well, and you mentioned the retail component. There's a strong retail and global component. How is overnight trading helping attract new investor segments, especially international participants and younger retail investors? 

Douglas Craig: I think when you take a step back, look at the returns of the US stock market over time, long term, not even since the bubble burst in 2000 and all that. US markets have outperformed their global peers to US equity markets. There's a ton of interest in US equity, people wanna buy, people want to own US stocks. Combined with not just domestically in the US but globally. The proliferation of news availability much easier information, travels much faster than it did previously.

And even my son, who's in 10th grade wants to get an app and wants to buy some shares of Nvidia. Everybody knows about Nvidia, right? So I think you have the returns in the US stock market. You have the information available, people are interested. [That] creates the demand and what is filling that demand? I think when you [have] more self-directed trading more brokerages, interactive brokers, Robinhood, Webull, catered almost exclusively to this younger investing, "I want to put $50 into Nvidia. I want to trade stock. I got an alert, Nvidia is down 5%. Maybe I should buy some." The ease of which the access is provided by these retail apps is unbelievable.

And then I think there's a demand, there's a competition for where are those orders gonna be directed, how are they gonna be executed? And I think especially now, what you're seeing is that again, the performance of the US stock marks proliferation of the retail trading apps globally. Now you have literally billions of people in Asia who are awake at 8:00 AM their time, 8:00 PM in New York, and they wanna buy US stocks. They want to have that same experience. They want to click on an app and get an execution and say, "I just bought $50 of Tesla," or whatever it is. So, I think that demand is being fulfilled by not only the brokerage houses and the retail trading applications, but also where is that flow gonna be executed? And I think that's brought about the innovation and the ATSs. And I would say that's almost exclusively what's driven that over the past several years in bringing these ATSs up, bringing these overnight 8:00 PM to 4:00 AM instantaneous execution of someone who's sitting in Asia, "I just bought US stock in real time." That's great.

Ali Curi: Yeah, that is really exciting. And have we seen measurable increases in engagement or in volume from these new segments? I don't know how much data you may have handy, but from a qualitative standpoint, it seems like there is a lot of momentum. 

Douglas Craig: There's definitely tons of momentum. I think it's the pie is growing, if you will, in terms of the shares that are matching.

I know Blue Ocean has been an incredible growth story. I don't have those hard stats with me right now, but it's definitely a growth story. I think the fact that there are two other ATSs really, MOON ATS I believe went live in the fall of last year of 2024, and then the Bruce ATS was the third one. They received their approval in March and now are up and running.

I think that is emblematic of the demand for, "Where are these trades going to take place, where are they gonna match?" And then I think you're seeing the exchanges follow suit and they want part of that pie. So if that means applying to the SEC to run longer hours and establishing overnight trading sessions or both. I think that kind of tells us what's going on, so it, it's a big growth story, I do believe.

ION Ad: This episode is brought to you by ION Markets. If you're exploring overnight equities trading, our Fidessa platform is the ideal solution. Our extended hours service runs nonstop from 3:00 PM Eastern on Sunday to 9:00 PM Eastern on Friday, providing round-the-clock access to US and global markets to learn more visit EQ.iongroup.com or email us at markets@iongroup.com 

Ali Curi: Let's continue with the data aspect of the conversation. Let's dig a little bit deeper, because market data is foundational for price discovery, but overnight sessions aren't quite fully equipped. Can you explain like what limitations exist around the SIP and NBBO data during these hours, and how does that affect transparency and trading quality?

Douglas Craig: Sure. For those of you who don't know, the SIP stands for the Security Information Processor and the US is one of the, might be the only country in the world that supports a consolidated market data infrastructure. So what does that mean?

There's 15 or so live US exchanges trading today, and they all have orders on their books. They all publish, bid and offer data, depth of book data, last sale data, and what the SIP does is it consolidates all that and allows for a single feed, if you will, to consume, bid, and offer data from all 15 of those exchanges, to consume last trade data from all of those exchanges. So no matter where a trade matches, New York Stock Exchange, NASDAQ, BATS that match, that last sale is disseminated in real time, publicly disseminated.

That's great for the integrity of the US markets. People always know where the best market is. They always have a real time indication of the trades that are going on in that market, the direction of the market, whatever information you can infer to that. I'm not aware of any other country in the world that has that consolidated infrastructure.

I know Europe's talked about it a number of times, but it's still very fragmented. In the current state the SIP runs from about 4:00 AM to 8:00 PM in line with most of the exchange off, out-of-hour sessions. The pre-market sessions starting at 4:00 AM, post-market session leading up to 7:30 or 8:00 PM. So in order for the exchanges to widen their trading hours or run 23x5, even continuous 24/7. The SIP infrastructure needs to be updated and everyone needs to agree to support those hours. I think we're on our way to that. I know that in terms of the 23x5 model, early May, the SIPP did announce plans to fly with the SEC a proposal to extend the hours. I believe it's something like 8:00 PM on Sunday until 8:00 PM on Friday. I believe there's a trading pause every day at 8:00 PM. Very interesting that that's in line with the kind of "wake up in the morning hours of Asia." But that SIP infrastructure kind of update in the widening of those operational hours is a must have for any exchange to actually be trading during those hours.

I also think that explains why the exchanges are lagging behind, so to speak, because they have these more formalities and they can't report their trades at 8:00 AM the next morning, and they truly have to have the kind of market data that bid an offer and the last sale disseminated in real time to preserve the integrity of the US markets. So I think that's super important. I think that also follows on in terms of risk protections and availability of the markets and who's gonna participate and who's not. The private ATSs all kind of operate in the dark, they are dark pools. Yes, you can subscribe to a market data feed, to a depth-of-book, that's a private feed, that's not published publicly. You can consume that into your infrastructure, your trading platform, but the exchanges have to tick a lot more boxes to really maintain that status quo of the integrity and the public dissemination of that information. 

Ali Curi: That is a really exciting roadmap for improving market data infrastructure. It's gonna be really interesting to see where that leads us. You talked about risk, with fewer protections in place, and volatility halts or "fat-finger checks" as they're called. What should investors and firms be aware of when trading after hours? Is this a temporary gap or are we headed towards a new risk framework for overnight sessions in particular?

Douglas Craig: I remember from my trading days that in situations where there are small participation and small liquidity available in the markets. There can be great dislocation, and what I mean by that is if there are only a few participants awake in the middle of the night, price moves can be exacerbated. It can be much more difficult to achieve on simple volumes of buy and sell matching and things like that.

Even in very popular and liquid stocks like Nvidia and Microsoft and Google and all that. So I think that risk is gonna be really, really important and really, really necessary to consider. When we look at the ATS for the very reason of investor protection, when we look at the ATSs, they all have a similar model. The three that are running now, they essentially take some sort of snapshot. It might be based on the close at 4:00 PM it might be where the markets are at, last sale at 8:00 PM or something. But they just create a high and low band up or down 2%. I'm not sure exactly what that is, but let's just say 5%, 2%, and they will not even accept orders outside of those bands during their entire session.

There's no market orders accepted in by the ATSs right now, to my knowledge. I think that certainly in the interest of preserving the integrity and protecting investors, the participation has been fairly controlled in terms of what's actually gonna match by the ATSs overnight. I think with the exchanges, given that they open at 4:00 AM today, there is not a lot of liquidity, there's a lot of event driven trading, a lot of event driven liquidity. When earnings get announced or tariffs get announced, or tariffs get canceled, or both, I do think there's some reaction to that, but I think if you're gonna run, even 23x5, you're gonna have to really think about and define, "Do retail orders have to opt in to be executed? What sort of risk parameters and price parameters and things like that should be enforced?" We have limit down volatility, we have short-sell restriction, exchange reg show limits in the US markets today. Should those apply? Should those be extended to the out of hours? If so, what should the benchmark be? The reference price? Are we really gonna have an NBBO, or is it gonna be like it is at 4:00 AM where there's very few quotes and liquidity published out to the marketplace? I definitely think there's the basis of that now, but again, it goes back to much more difficult for the exchanges and the regulators to formally solve that problem, provide some guidance.

Ali Curi: So you do see regulators stepping in to close these gaps, or do you think it would be more driven by market innovation? 

Douglas Craig: I think what you're seeing now is clearly the innovation, but I think in order to have a truly overnight marketplace, widespread participation across ATSs institutions, hedge funds, electronic trading retail investors, I think that really, for the exchanges to participate, there's probably gonna be the need for some regulation and some rule setting. It's one thing for an ATS to say, "I'm gonna snap a price at 8:00 PM and create some bands. I'm just not gonna accept orders outside of that." Because there's so much competition for this pie of overnight trading interest, that maybe some other venues or exchanges, maybe they're gonna be a little bit leeway, a little bit lax in terms of those restrictions so that they can garner more order flow and provide more liquidity.

I think definitely, the industry typically like to weigh in on the side of less regulation. But I do think that given the way that US markets are structured and given the level of regulation, high level of regulation, that exists today in the exchange and even across the ATS approval and things like that, I think it's unavoidable that the regulators are gonna have to weigh in at some point.

Great question. I know we might hit the operational aspect of this for a second, but I mentioned that it's very natural for US individuals, US participants to think of, "Well, my overnight reset, I need to reset my fixed sessions. I need to apply my corporate actions. I need to pause trading." Well, ARCA has proposed to do that between 11:30 PM and 1:30 AM across midnight. It's very clear what date things are taking place on and what the trade date and what the settlement date. The SIP proposed an 8:00 PM pause for about an hour, which would mean trading would start approximately 9:00 PM and go again the next 23 hours until 8:00 PM. That's totally different, and that to me, I bring up that example as kind of like, I feel the regulators are really gonna need to weigh in on what is or is not appropriate as far as that.

Because if we have half the US participants rolling over at midnight and the other half at 8:00 PM, that's completely decentralized and dysfunctional and disorganized. I think that's gonna be really challenging. 

Ali Curi: I really like that you brought up some of those operational challenges because beyond trading and beyond the regulatory challenges that either exist or are going to come up, how does the 23x5 trading impact processes like corporate actions and clearing cycles or just system maintenance? I mean, I guess what I'm asking is are we asking the infrastructure to do more than it was designed for or are we looking for a big paradigm shift there as well? 

Douglas Craig: I think two things. I think to support a 23x5 model is, it's very different from what it is today, but I think that does yeah, baked in there a quote unquote "reset."

That reset could mean a ton of different things. That reset is probably, for all intents and purposes, it's mostly 8:00 PM to 4:00 AM today. You have to apply corporate actions. You might have to reset sequence numbers on fixed sessions. You might have to upgrade your software. You might have to switch a server out because it went down and you had to fail over to the backup, and you need to preserve that dual kind of infrastructure.

Even to think about clearing, right, if you're gonna trade at 9:00 PM, is that trade today? Is that trade tomorrow? Is that a 2+, T+1 settlement? Do I really have to trade, settle that by 3:00 PM the next day? All sorts of questions and things that could be rolled out, not just from a kind of operational, kind of rules and regulation standpoint, but just from all the exchanges, all the ATSs. They're really financial technology firms, and I get they operate within a different ecosystem. But you know, NASDAQ used to be an exchange. NASDAQ is a technology conglomerate right now, and that's great, that's part of that innovation. But there's a massive infrastructure of data centers and network connections and permissionings and testing and rollouts and all that stuff that needs to be managed. Also, add the second big, another, a big operational hurdle is if we're really gonna be operating overnight, even 23x5, with that hour-long pause whenever it turns out to be. Well, what does that mean for participants? What does that mean for brokers? What does that mean for software vendors? What does that mean for exchanges?

Really, I'm thinking about, "Do we have to have trading desks staffed from 8:00 PM till 4:00 AM during the overnight hours? Do we have to have technology help desks, help centers and call centers and things like that, staffed during that time? Do we have to have technicians and developers available to investigate network outages or server outages or software defects or any of that stuff?"

Really it shortening that window I think is gonna be really challenging and I'll highlight the difference. One last thing, 23x5, okay, fine. I get the weekend off. I can do things on Saturday. I can upgrade platforms, I can swap out hardware. I have a agreed upon window where everyone's gonna reset.

Yeah, I have eight hours to apply my corporate actions, but I only have an hour. All those challenges seem very achievable. Again, in the spirit of technology advances and uber competitive and innovative US equity market infrastructure. I think 24x7 is gonna be much, much more challenging. There's no downtime or is there a "done," is there some sort of pause?

Is there really demand for trading on the weekends? If so, same things. Do I have to have desk staff? Do I have to have help, call centers staffed? All those same things apply. I think it would be much more difficult to achieve the 24x7, if I'm honest. 

Ali Curi: Yeah. I'm really glad you touched on, what does supporting overnight trading actually require?

Having an overnight service model, what does that look like? I imagine you see a growing demand for a fully automated, no-touch workflow. As we get deeper and deeper into trying to get a complete 24/7 model. What are your thoughts around that? The growing demand for a fully automated, no-touch workflow during off hours.

Douglas Craig: I do think that automation will be a big part of this story. There's a huge demand for no-touch workflows, even in the middle of the trading day. Automation, doing more with less. If that gets extended to the overnight hours, maybe that's a response to the notion of, "Well, I don't need a human on the desk, I just need someone that's gonna get some sort of alert and can intervene and log on remotely or something if there's actually an issue or something that needs to be addressed."

I think ultimately it's really gonna be a trade off between the operational cost, whatever that turns out to be from a technology, from a human capital, from a "lights on" approach, versus, "What's my business risk? Is there enough interest? Is there enough trading? Is there enough event driven liquidity and participation during these overnight hours where there really is a risk presented by not having a human oversee it or monitor it or manage it?"

Are we good by putting some guardrails in place with the automation and making sure our exceptions are handled appropriately and leveraging a more hands-off model? I'm not really sure. I think, firms and participants are gonna have to judge that trade off amongst themselves and see where they fall on that spectrum.

But I remember when 4:00 AM came along some years ago in terms of the major US exchanges operating and opening. I don't know that there's a lot of individuals getting to the office at 4:00 AM in New York, logging on and trading Tesla, Nvidia or Microsoft in the out-of-hour session.

So I think up to now has been a pretty hands-off approach, but certainly that could change. 

Ali Curi: And what would you say is the most important next milestone to watch for in this space? 

Douglas Craig: So I mentioned the SIP Market Data Consortium announced plans to file a proposal with the SEC to extend the trading hours.

That'll be a formal proposal that'll be out for comment. I'm sure a lot of people have a lot of opinions on that. That big question, 8:00 PM? Midnight? Should there be a rollover? How long is the rollover? All sorts of questions on that. I think that's a real big one. So certainly to even see the early May announcement that the SIP plans to do that, to file a proposal for extended operating hours, I think that's a great milestone.

The 24X Exchange has filed to be a new US exchange as they have been approved for regular hours, 4:00 AM to 8:00 PM. They have a qualified approval to operate on a wider model. I think that depends on the SIP becoming operable during those out-of-hours sessions. Closely related, if you will, in terms of both those things to happen.

But I think the next real big milestone, there could be some other ATSs and like I said, the models are all pretty similar rate now and certainly fulfilling a demand of being able to trade during that overnight session. I think the real big model is, is the SIP gonna get approved? What's that gonna look like?

And will ultimately the exchanges be able to widen their hours or even provide some other type of model in terms of a 8:00 PM rollover in line with the SIP or something like that. So I definitely think that the exchanges are really, really hungry. Again, tons of innovation and competition in the US equity markets.

So I do think it's gonna happen, but I'm not quite sure exactly what it's gonna look like. A lot of questions need to be ironed out. 

Ali Curi: Many questions. Indeed, Doug. There are so many more things to discuss around overnight trading and finance, but for now, what's the one big thing you hope listeners will take away from this episode?

Douglas Craig: I think that it's clear overnight trading is here to stay. I think that running additional overnight sessions. I think that the 23x5 model, I think that's something really, really tangible and achievable. And you know, just like we talked about with the milestones, when the exchanges begin to get approval to participate and widen their hours and really compete in that overnight trading session, I think that there could be all sort of competition involved in that. Maybe the retail wholesalers wanna internalize out-of-hours. Maybe there'll be other ATSs with different innovative models. Maybe the exchanges will come along with different hours and different order types and things like that.

I definitely think overnight trading here to stay, 23x5 very achievable. 24x7, I think that's a lot more boxes need to be checked. I think that's much more challenging. Even knowing what we know about the software world and the way things need to operate and the way things need to be reset, I think that continuous 24x7 is really, really difficult. And when we weigh the benefits of that, we have to ask questions of, is there really demand on a Saturday morning or a Saturday night for that, or is everyone satisfied sort of stepping back and just trading during the work week. I will say it's global markets, everything's getting more and more interconnected. We have the time zone differences. We've talked about the Asian hours and the Asian participants that want to buy US stocks and why that's really driving the overnight sessions.

I think that, I just realized this, the Saudi market operates a Sunday session. During the day on Sunday during the day, local time during the day. I think maybe that market operates Sunday through Thursday or something like that. So really interesting when we think about global trading, integration of platforms and processes and Microsoft.

There's 50 different versions of Microsoft that trade all around the world. In Japan, in Germany, in the US of course, on ATSs in Canada. I think there's such interconnectedness I could see it happening, but I do think it's gonna be a big lift and a kind of a cost benefit analysis to see if the 24x7 actually comes to fruition.

Ali Curi: Great. Well, I'm gonna shift gears here for a minute and I have one bonus question for you. What's an important lesson you've learned in your career so far that others can learn from? 

Douglas Craig: I talked about my background as a trader in transitioning to financial technology, and one thing has been pretty standard even before I started working.

People are gonna make mistakes. I make mistakes. I make mistakes all the time. People, that's just a natural, natural thing that's going to happen. No matter how prepared you are or how level of expertise you have or anything like that, you're gonna make mistakes. Don't be afraid to own your mistakes, and please be sure that you learn from your mistakes. That's how we all grow and that's how we all get better. 

Ali Curi: I think those are some wise words. Douglas Craig, thank you for joining me on the podcast and sharing your insights. Let's do it again soon. 

Douglas Craig: Pleasure. Thanks for having me on. 

Ali Curi: And that's our episode for today. You can follow ION markets on X and on LinkedIn.

Thank you for joining us.