A strong investor protection regime is an important component of a robust U.S. equities market, according to a new paper published by MEMX, titled Evolving Investor Protections for 24-Hour Trading: Member Poll Results, however, certain investor protections currently only apply during regular trading hours.
With the upcoming extension of exchange hours, MEMX recently conducted a member poll asking market participants about whether and how investor protections should be updated to accommodate this move.
According to the findings, there is significant support across the industry to expand key protections such as the Limit Up-Limit Down (LULD) Plan and Market-Wide Circuit Breakers (MWCB).
The LULD Plan, currently active only during regular trading hours from 9:30 a.m. to 4:00 p.m., is designed to prevent excessive price swings in individual stocks by establishing dynamic price bands around a moving reference price. If a stock’s price moves too quickly, trading is paused to allow liquidity to catch up. According to the MEMX poll, three-quarters of respondents support expanding these protections to cover all exchange trading hours, including overnight sessions.
However, as outlined in the paper by Adrian Griffiths, Head of Market Structure, MEMX, simply extending the current framework may not work. Liquidity during off-hours trading is far more limited, and many stocks trade only a handful of shares.
MEMX data from April and May 2025 showed that while 1,282 NMS stocks traded overnight on average each day, the median volume was just 288 shares, with a median notional value of $8,465. Under such conditions, the dynamic price calculations that the LULD Plan depends on—based on a rolling five-minute average of trades—are often unworkable, the paper said.
MEMX recommends expanding volatility protections with necessary adjustments. This includes the use of wider price bands during low-liquidity periods and the use of static reference prices when dynamic ones can’t be reliably calculated. The paper references the current model used by Blue Ocean ATS (BOATS), which applies a 20% band above and below a 7:30 p.m. reference price. MEMX considers this a viable starting point for illiquid stocks but suggests that more liquid securities could benefit from dynamic price bands similar to those used during regular trading hours.
The data also show that while most NMS stocks exhibit limited overnight movement, some stocks—particularly high-volume names like TSLA, NVDA, SPY, and QQQ—account for a disproportionate share of overnight activity. On April 7, 2025, for instance, amid macroeconomic volatility and a sharp rise in the VIX, 41 million shares were traded overnight for a notional value of $2.2 billion. Of this, $300 million was in NVDA and $260 million in TSLA. Despite both stocks trading down significantly, the range of overnight price movement was relatively narrow compared to the static reference price used. This suggests, according to MEMX, that dynamic reference prices and narrower bands could be feasible for these stocks, especially on volatile days when accurate price discovery is critical.
To assess this, MEMX recalculated notional value traded through a hypothetical 10% price band excluding the top 10 overnight-traded symbols. On April 7, 2025, this adjustment would have reduced the impacted notional from 7.2% to 3.8%, illustrating the potential benefit of using more precise mechanisms for highly active names. MEMX concludes that a flexible system, one that adapts band width and reference price methodology based on trading volume and volatility, may be more appropriate than a rigid framework.
The survey also revealed strong support for updating clearly erroneous trade rules. These rules currently supplement the LULD Plan during regular trading hours, allowing trades to be reversed in the event of system errors or data issues. However, they operate independently during pre- and post-market sessions. MEMX argues that “preventing bad trades is generally better than busting them after the fact,” and recommends that if harmonized price bands are implemented, clearly erroneous rules should be amended accordingly. Under the proposed approach, trades executed within properly calibrated bands would stand, while only those outside those bands—or affected by technology issues—would be eligible for review.
MEMX’s poll also included a question about extending MWCB protections to overnight sessions. The MWCB system currently halts trading market-wide when the S&P 500 Index drops by 7%, 13%, or 20% during regular trading hours. However, these circuit breakers are not active outside of the 9:30 a.m. to 4:00 p.m. window. With increased after-hours activity, two-thirds of respondents expressed support for extending these protections to all sessions. Yet doing so raises practical concerns. The S&P 500 is not currently calculated during overnight hours, so an alternative proxy—such as SPY—would be needed. Even then, there are questions about whether a meaningful measure of market-wide movement is possible when many underlying stocks are not actively trading.
Another issue raised in the paper relates to what happens after a Level 3 MWCB halt is triggered. Under current rules, a 20% drop in the S&P 500 halts trading for the rest of the day. Exchanges then resume trading at 4:00 a.m. the following morning, though this start time is not explicitly codified in MWCB rules. Instead, the rules only state that trading remains halted “for the remainder of the trading day.” As a result, once exchanges formally extend their trading calendars—potentially to 9:00 p.m.—the effective “next day” could begin much earlier than currently assumed.
While a small minority of poll respondents supported resuming trading at 9:00 p.m. under this expanded schedule, a clear majority preferred a different approach. More than half favored restarting with the 9:30 a.m. opening auction on the primary listing exchange, while others supported a 4:00 a.m. pre-market open. Many respondents noted that exchange may not create a separate overnight session, and extending the existing pre-market structure could eliminate a natural restart point. Others argued that, absent operational constraints, a longer cooling-off period following a significant market event would serve investors better. In addition, several cited the role of opening auctions in consolidating liquidity and facilitating robust price discovery.
MEMX’s final recommendation on this point is that if a Level 3 MWCB event occurs, trading should resume with the primary listing exchange’s opening auction, not during the overnight or early pre-market hours. This approach, the paper notes, would “promote stability at a time of market uncertainty.”
