FLASH FRIDAY: So Many Trades, So Little Time?

FLASH FRIDAY is a weekly content series looking at the past, present and future of capital markets trading and technology. FLASH FRIDAY is sponsored by Instinet.

With the recent brouhaha about the uh, shall we say, ‘rigorous schedule’ of young analysts at Goldman Sachs, it’s worth looking back on the modern history of trading hours on U.S. exchanges.

An April 1999 Traders Magazine article, “Longer Trading Days Predicted by Berkeley,” sets the stage.

From the article:

“Nasdaq traders, harried by the stress of regular trading hours, may have to prepare for more stress and longer working days.

With the New York Stock Exchange mulling extended trading hours, and several upstart brokers promising after-hours trading to their retail customers, a move by Nasdaq to follow suit is clearly being influenced by the competition.

Nasdaq President Alfred Berkeley has predicted that the regular Nasdaq trading day will extend to ten hours or more.

“We will extend our hours, and we think the New York [Stock Exchange] will extend their hours as well,” said Berkeley, in a speech to the Council of Institutional Investors in Washington. The regular trading session on both exchanges currently runs from 9:30 a.m. to 4:00 p.m. (EST)…

While the Big Board considers opening at least 30 minutes earlier, Nasdaq is debating an even earlier opening, at 8 a.m. or 8:30 a.m., and staying open later. “The consensus is we probably ought to stay open until 9 p.m. [EST],” giving investors on the West Coast the opportunity to trade until 6 p.m., Berkeley said.”

Investopedia explained how extended hours moved forward:

“The first iterative step occurred in 1999 when Nasdaq opened for business at 7 a.m. Then in March 2013, it shifted its start time back another three hours, in an effort to compete with the New York Stock Exchange, which introduced a pre-market start time of 4 a.m., back in 2005. And thanks to electronic communication networks (ECNs), which match potential buyers and sellers without using a traditional stock exchange, investors can trade stocks during the aftermarket hours between 4:00 p.m. to 8:00 p.m.”

Fast forward to 2021, and while the regular trading day of 9:30 a.m. to 4:00 p.m. remains the same, before- and after-hours trading are now entrenched. After hours trading volume on Nasdaq has been around 100 million to 150 million shares per day in recent days, with a high of almost 500 million shares on March 19, according to Nasdaq data. Total Nasdaq trading volume has been around 6 billion shares daily.  

With companies reporting earnings and other material announcements before or after the bell, and retail traders in particular interested in the volatility around those news items, institutional traders may not need to toil Goldman-banker hours, but neither can they call it a day promptly at 4 p.m. like they used to.