Overnight Trading Gains Traction with the NYSE on Board

Competitors are entering the market for 24/5 trading after Blue Ocean ATS taps demand from retail investors during Asia’s daytime hours.

The buzz around overnight trading is getting louder now that the New York Stock Exchange plans to extend weekday trading on its Arca electronic exchange, pushing the securities industry closer to offering 24/5 trading. 

In late October, the NYSE, a division of Intercontinental Exchange, said it was looking to extend US equity trading from 16 hours to 22 hours a day, five days a week, except on holidays. The Big Board is seeking permission to operate from 1:30 am to 11:30 pm Eastern time, pending a rule filing with the Securities and Exchange Commission.  

The moves come with heightened interest from retail investors, which is causing exchanges and brokerages to expand their offerings. In a CNBC article, Kevin Tyrrell, the NYSE’s head of markets, said: “Interest in U.S. equities from both retail and institutional investors continues to grow, both in the U.S. and globally.” 

Round-the-clock trading has been evolving for decades. Exchanges offer their main session from 9:00 am to 4:30 pm Eastern Time. There is a pre-market session from 4:00 am to 9:00 am, and a post-market session from 4:30 pm to 8:00 pm ET.  

Some argue there are pros and cons to 24-hour trading. On the one hand, traders can use the extended hours to manage the risk of geopolitical events, the uncertainty on US interest rates and the risk of elections. On the other hand, some industry observers have cautioned that trading volumes are thinner overnight and there can be more volatility outside of regular trading hours.  

Until now, market players have waited on the sidelines to gauge the demand for overnight trading which has been occurring through alternative trading system (ATS) owned by fintech firm Blue Ocean Technologies.  

An ATS Leads the Way

Blue Ocean’s ATS, launched in 2021, operates when the US exchanges are closed, filling the gap from 8:00 pm to 4:00 am ET, Sunday to Thursday, which corresponds with the most active period in Asia.  

Online brokers such as Robinhood and Interactive Brokers (IBKR) offer overnight trading in hundreds of ETFs and stocks to their retail customers through the U.S. regulated trading platform Blue Ocean ATS.  

Some exchanges are waiting to see what happens with the 24National Exchange LLC, which originally filed an application with the SEC to operate 24/7 trading in the U.S., which is the same hours that cryptocurrencies are available. In August, it amended its application to provide 23/5 trading. A decision by the SEC is expected by the end of November.  

But the entry of the NYSE with 22/5 trading and the potential approval of 24National Exchange could be a game changer.  If both exchanges are approved, the SEC could require the securities information processor or “SIP” and the trade reporting facilities (TRFs) to extend their operating hours.  

Currently, Blue Ocean is the only ATS that trades overnight. 

“Competition has been good for us,” said Brian Hyndman, CEO of Blue Ocean Technologies LLC, at the SIFMA Market Structure conference on a panel about ATS innovation. “The NYSE announcement has resonated around the globe. That has created so much buzz in the industry he said, and the amount of business and incoming calls it created was huge.” 

Tapping Demand from Asia

On the night of the U.S. Presidential election into Nov. 6^th, Blue Ocean ATS executed a record high $3.27 billion in notional volume during the overnight session. Blue Ocean’s average daily volumes range from 30 to 50 million shares, up from 11 million in 2023, as compared with less than one million shares in 2022. The firm has 55 brokers on the platform covering Japan, South Korea, Singapore, and the U.S. 

Initially, Hyndman said the ATS operator was not sure where the flow was going to come from.  “We thought it would be coming from the US retail during episodic events such as a door blowing off a Boeing plane or a strike in Gaza.” But it’s much more than that, he said.  On any given night, the ATS trades 5,000 different stocks. “It’s not just Nvidia and Tesla.” 

Hyndman said Asian brokers think the volume could go to 2 billion shares a day. In August, the ATS completed an update of its technology to an exchange grade-level platform powered by the Members Exchange (MEMX).  

Brokers agree the demand for overnight trading is driven by retail investors in Asia who want to trade U.S. stocks and ETFs during their daytime hours. 

Steve Sanders, executive vice president, marketing and product development at Interactive Brokers, said 24-hour trading had been tried before but fizzled out. “The reason this is working for us is because over 85% of the new [account] applications are from overseas, so there are many other people sitting in other time zones that could potentially be interested in this,” said Sanders. 

In November of 2022, IKBR began offering extended trading hours with actively traded US ETFs on the IB Eos ATS. In 2023, it expanded the offering and now covers over 10,000 stocks and ETFs and has added U.S. equity index options. 

IKBR built its own ATS – IB Eos which is dedicated to overnight trading. In July 2023, the global automated broker connected to Blue Ocean ATS. Clients can route the order as “overnight” (by smart routing between Blue Ocean and IB Eos), or they can direct route to IBEOS, according to Sanders. 

“We built an ATS for this purpose because we wanted redundancy,” said Sanders.  He noted that IBKR caters to a more sophisticated audience, of which half is institutional, including hedge funds, brokers, advisors and proprietary traders as well as individuals. “If they are willing to post quotes into the book, which they many of them are, then it works to everyone’s advantage.”   

In October, Reuters reported that IBKR has seen volumes in those overnight sessions grow some 500% between the beginning of 2024. In Q3, IBKR reported that 2.5% of all its US trades happened during the overnight period when U.S. exchanges are closed. 

Meanwhile, other markets have noticed Blue Ocean’s success and are beginning to jump in.  

OTC Overnight Launches

In September, OTC Markets Group, a regulated financial market for over 12,000 U.S. and global securities, officially launched OTC Overnight trading for a select group of active securities that are eligible for trading Sunday through Thursday, between 8 pm and 4 am EST.  

Matt Fuchs, executive vice president, market data at OTC Market Group, said the market operator noticed that the volumes in foreign cross-listed securities have increased during Asian market hours. “We have a lot of European brand names that we believe that Asian investors would be interested in, like Louis Vuitton and Adidas. That is what we saw as the opportunity,” said Fuchs. 

This is the same as what’s going on with Blue Ocean, where the main consumer is the retail investor in Asia, he noted. But what’s different is that OTC Markets Group has a unique set of 9,000 cross-listed foreign names, including over 3,000 European names and 1,300 Japanese names. These are liquid ADRs of global securities priced in US dollars, such as LVMH Moet Hennessy Louis Vuitton, Roche Holdings and Heineken, that may appeal to investors in Asia. In addition, it has ordinary shares of well-known companies such as Bombardier and Air Canada Inc.  

Fuchs said the company built a separate ATS for overnight trading and is lining up liquidity providers. The OTC Overnight application stack is separate from the OTC Link ATS application stack, and there are separate market data channels for OTC Overnight data. “The market data feeds, and all the infrastructure is operational and now we’re trying to build out the market,” said Fuchs. 

Since there is no SIP in the OTC market, Overnight OTC will collect and disseminate its own market data feeds for the overnight session. Fuchs said it will work with market data vendors to distribute the overnight feed, which is what it does for daytime trading.   

Once OTC Markets starts disseminating their overnight feed, FlexTrade’s order and execution management systems (OEMSs) will consume the OTC feeds along with the SIP feed for listed equities when exchanges get involved, said Joe Cossu, Director & OMS Business Development at FlexTrade. Several OTC dealers use FlexTrade’s ColorPalette OEMS to receive prices and make markets in OTC names. 

In addition, several U.S. brokers use the FlexTrade sell-side OMSs (ColorPalette and FlexOMS) to connect with Blue Ocean ATS and route order flow from their retail brokerage arms in APAC. 

“We’ve seen very strong growth in those volumes and think it’s going to continue,” said Shane Remolina, Director of Business Development for Sell-Side Solutions at FlexTrade. A lot of retail investors overseas are sending orders inbound with order flow overnight, which is occurring during APAC’s daytime trading hours, said Remolina. “I don’t see that letting up,” said Remolina, who expects overseas volumes to continue to grow, though, he notes it will take some time to get proper liquidity into that market as well.” 

Additional liquidity will depend on market makers and participation from the buy side firms. Blue Ocean has a variety of market makers – Jane Street, Virtu Financial and Flow Traders which have both U.S. and overseas operations, noted Blue Ocean’s Hyndman. 

In response to whether the demand will expand from retail to institutions, Hyndman said: “This is the first inning, it is very retail. I do see hedge funds and institutional flow that want to come on the platform.” 

Market Infrastructure Challenges

At the SIFMA Market Structure Conference on Nov. 7, throughout the panels, brokerage executives said the industry needs a roadmap to plan for 24/5 trading, and that currently the infrastructure does not exist. Some questioned the cost of connectivity to new venues, staffing, and best-execution obligations during the overnight period, while pointing to the lack of demand from institutions. 

Blue Ocean’s Hyndman said some of the main obstacles to 24/5 trading are that the securities information processor (SIP) is not operating overnight, and that trade reporting is still batched.  

For example, Blue Ocean sends over all its trades in batch to DTCC at 8:00, but recently DTCC has moved up the opening to 1:30 am to support players like Blue Ocean and IBKR, and in 2026 they’re going to be 24/5, he noted. “Now that many recognize that the overnight space is here to stay, the industry is starting to make some changes,” he said, in an interview. 

Another issue is related to the cut-off times for clearance and settlement. DTCC has the continuous net settlement system (CNS). “Before the trade settles, there is credit risk,” noted IBKR’s Sanders, suggesting that if overnight volumes increase, then CNS could settle in the middle of the night to eliminate the credit risk. 

In a CNBC video interview, NYSE President Lynn Martin cited the DTCC’s earlier opening as a factor in its decision to extend hours to 22/5. “As a result of our clearing house, DTCC, electing to extend their clearing hours, we think it was important to extend the hallmarks of the New York Stock Exchange,” said Martin, citing resiliency and stability. 

In terms of providing real-time market data, the NYSE said it will seek support from the US securities information processors (SIPs) which collect, gather and disseminate the exchange data feed. Currently, the SIP or consolidated tape is not available from 8 pm to 4 am ET during the overnight session. 

Hyndman, who is a former Nasdaq executive, said it would be difficult for exchanges to operate in the overnight space without the SIP carrying that data overnight so they can disseminate it around the world. Several industry sources said this could be a multi-year project for the committee that runs the SIP. Hyndman estimated it could take another 18-24 months.  

Future Direction

As firms look ahead, market participants are watching to see what happens with the 24Exchange application.   

“If the exchange membership is approved for that overnight session, it’s really going to push the industry further along that path,” said FlexTrade’s Remolina, who predicts the industry will evolve to 24/7 markets. “It’s definitely going to happen within the decade, probably within the next 5 to 7 years.” 

Regulatory experts at SIFMA said they expected the SEC to approve the 24National Exchange application by Nov. 29, contingent on the SIP and the real-time trade reporting operating during the overnight hours.  

As a sign of the emerging competition, OTC Markets Group plans to expand into NMS securities. ”We have submitted an initial filing to create a new ATS for overnight trading of NMS securities, and it is pending regulatory approval,” said Fuchs. On Nov. 20, OTCM announced the official launch of Moon ATS upon the completion of the SEC filing process. Moon will offer access to NMS securities listed on major exchanges during the overnight hours.  

When asked if he expects other markets to jump in, Hyndman said: “We know that competition is going to come. It will probably come in the form of another ATS first before an exchange,” he said. There is also demand for options overseas, and the potential for an options exchange to gain market share, he said.