What caught my eye this week.
Every morning at 9.30am in New York, a bell is rung at the famous Stock Exchange to signal the start of trading.
It happens again with a closing bell at 4.30pm – repeating a routine that’s watched by almost nobody in the actual business of investing.
Okay, a few hundred floor traders are prompted to think about which route they’ll take home. A giddy CEO from a biotech wonders if they chose a diverse enough team to join them on the platform for the bell-ringing ‘ceremony’ they coughed up for. A retired dentist in Florida watching CNBC growls as yet another day’s viewing has not revealed what sank her 3M stock.
Elsewhere, data whips around the globe. A high frequency hedge fund manager visiting a server farm coughs politely and suggests her cabling could be at bit closer to the wall. A thousand crypto bros ply their trades, day and night. And a fund manager in Tokyo curses himself for snoozing through his alarm and missing the US close.
Major currencies and bonds can now be traded all day and night from Monday to Friday.
But US equities can only be traded out-of-hours in a half-arsed fashion – via wonderfully-named ‘dark pools’ if you’re an institution, or even the internal markets of certain US retail platforms like Robinhood.
And that isn’t good enough for some people.
Be a part of it
24 Exchange – a startup US trading venue backed by hedge fund manager Steven Cohen – has been looking to take trading 24-hours for years.
Its latest submission is with the regulators. Meanwhile the New York Stock Exchange is polling interested parties about how non-stop weekday trading could work.
The Financial Times notes [1] the survey is being conducted by the New York Exchange’s data analytics team, rather than its management. It seems like a fact-finding foray at this point.
And one can certainly imagine all sorts of technical obstacles – from staffing to liquidity to compliance – that would challenge a stock market rolling along for 120 hours on the trot.
On the other hand, doesn’t it feel sort of odd that we still have set market hours?
The whole show is run by restless machines these days anyway, while cryptocurrencies have given the younger human participants a taste for always-on trading.
Google news stories about the New York poll and you’ll find most of the coverage is from the crypto sites. Not a coincidence.
There’s even an intellectual argument for 24/7 trading.
A stock’s price is supposed to reflect all known information about that company and its future cashflows.
But if an earthquake happens in San Francisco on Monday evening, say, a US company’s price is basically a stab in the dark until Tuesday morning.
Investors who want to react to the news cannot do so – except via overseas proxies, the futures market, or those alternative trading venues I mentioned. All of which have their own issues.
It’s up to you New York, New York
Whether reducing these ‘blind spots’ in pricing overnight – and even, conceivably, at weekends – would produce more accurate prices overall is an open question.
Already out-of-hours markets are bedevilled with illiquidity and glitchy pricing.
Long-time commentator Felix Salmon warns “off-hours markets can be treacherous places for investors” and reckons any 24-hour equity market would be a ‘casino’.
Writing on Axios [2], Salmon also notes that institutions already do most of their share trading around the market’s open and close, when liquidity is greatest.
So most of them wouldn’t want anything to do with buying Tesla shares at 1am on a Wednesday.
That would make official nighttime trading the domain of retail punters – and of those who’d prey on them.
Which probably wouldn’t end well for the punters.
“As any casino will tell you, risky gambles are more popular at night,” Salmon concludes.
Contrarily, some European insiders are discussing [3] actually reducing trading hours on the continent. European trading hours are currently two hours longer than the six-and-a-half hours seen in the US.
The aim would be to shore up liquidity, rather than spreading it even thinner over a longer trading window.
These little-town blues
Where any of this would leave the poor old London Stock Exchange is anyone’s guess.
For many decades London profited from being in a convenient timezone between Asia and the US continent – as well from its ultra-close proximity to Europe.
Would London have more or less relevance in an always-on trading world?
Or are we anyway on a path to one exchange – in New York, which is already home to around two-thirds of global listed equities by value?
Who knows, but in the meantime the London market’s struggles continue.
This week we saw DarkTrace [4], Tyman, and Hipgnosis agree to bids from overseas acquirers [5]. The £2bn drug maker Invidior also confirmed [6] previously mooted plans to shift its primary listing to the US.
All in a day’s work for the shrinking LSE.
AJ Bells’ investment director Russ Mould warns the volume of firms being snapped up means “the UK market is experiencing death by a thousand cuts.”
Still, it’s an opportunity to profit if you’re an active investor [7]. At least it is if you can figure out what’s truly cheap and/or potentially attractive, versus what’s a conked-out value trap. (Harder than it looks.)
Needless to say, passive investors [8] owning global trackers [9] can ignore all this noise with a wry shake of their heads – and then continue to go about their business of compounding their long-term gains, regardless of how and when the underlying shares are traded!
Have a great weekend.
From Monevator
Fancy a short duration index-linked gilt fund to guard against inflation? – Monevator [10]
From the archive-ator: How to save money on travel – Monevator [11]
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
Homeowner pain as major banks hike mortgage rates – BBC [12]
Charles Schwab eyes UK rollout for US-domiciled ETFs [Search result] – FT [13]
UK rejects talks on EU-wide youth mobility scheme – Yahoo [14]
IG Group faces criticism after clients hit by refunding errors – Shares [15]
Pensioners’ fears over paying income tax – BBC [16]
Paragon Bank reveals the top ten buy-to-let hotspots – This Is Money [17]
London leaseholders told they face costs of up to £99,000 each – BBC [18]
Many UK adults unwilling to travel to Europe under new entry/exit scheme – Euronews [19]
[20]
KPMG UK cancels foreign graduate job offers after tighter visa rules… [Search result] – FT [21]
…rules that campaigners say penalises couples – BBC [22]
Products and services
The pros and cons of Monzo’s new paid-for accounts – Be Clever With Your Cash [23]
Can long-term mortgages help solve the UK’s housing crisis? [Search result] – FT [24]
Sign-up to Trading 212 via our affiliate link [25] to claim free fractional shares worth up to £100. T&Cs apply – Trading 212 [25]
Blackrock is trialling a product to deliver paycheque-like income from a retirement portfolio [US but relevant] – CNBC [26]
How does Co-Op Bank’s new 7% regular saver account compare? – Which [27]
Outfox The Market’s new energy deal 13% cheaper than Ofgem price cap – This Is Money [28]
Open an account with low-cost platform InvestEngine via our link [29] and you could get up to £2,500 as a cashback bonus (T&Cs apply. Capital at risk) – InvestEngine [29]
Aviva launches free pension tracing service – Which [30]
Six questions to ask before taking out private medical insurance – Which [31]
One year with a Tesla Model Y – Mr Money Mustache [32]
Urban flats for sale, in pictures – Guardian [33]
Comment and opinion
Join the investor class as soon as you can – Downtown Josh Brown [34]
Is it too late to invest in the gold rush? [Search result] – FT [35]
All about the quest – Humble Dollar [36]
Are you an investing historian or a futurist? – Morningstar [37]
Risk seeking versus risk mitigating – Collaborative Fund [38]
Large cap US growth dominance is mostly a multiple expansion story – Morningstar [39]
Why do people make ‘bad’ financial decisions? – Of Dollars and Data [40]
Volatility is a necessary evil in the stock market – A Wealth of Common Sense [41]
Should a retiree keep paying life insurance premiums? [US but relevant] – Oblivious Investor [42]
Diversification is a negatively-priced lunch [Podcast, nerdy] – Flirting With Models [43]
Naughty corner: Active antics
Even ‘forever’ stocks have a shelf life – Micro Cap Club [44]
Accounting numbers and cash have to add up…eventually – Capital Gains [45]
Hedge funds have done better than we thought, but there’s catches – Alpha Architect [46]
Retail investors trade riskier ETFs too much – Klement on Investing [47]
How’s the private equity winter looking? [Search result] – FT [48]
Risk parity has underperformed for years – Bloomberg via F.A. [49]
Kindle book bargains
How to Read Numbers by Tom Chivers –£0.99 on Kindle [50]
The Dip: Knowing When to Quit by Seth Godin – £0.99 on Kindle [51]
The Pathless Life by Paul Millerd – £0.99 on Kindle [52]
The Deficit Myth by Stephanie Kelton – £0.99 on Kindle [53]
Environmental factors
Conservation slows biodiversity loss, scientists say – BBC [54]
High prices blamed for heat pump installations running behind target – This Is Money [55]
What the heck is seaweed mining? – Hakai [56]
‘Huge disappointment’ as UK delays bottle deposit plan and excludes glass – Guardian [57]
What happens after your country runs on 99% renewable electricity? – The Verge [58]
Birdsong no longer signals the onset of spring in Cambridge – Guardian [59]
Robot overlord roundup
Daniel Dennett: “Civilisation is more fragile than we realised” – BBC [60]
AI is the end of the web as we know it – The Atlantic [61] [h/t Abnormal Returns [62]]
Technological risks are not the end of the world – Science [63]
Looking for AI use cases – Benedict Evans [64]
‘Miss AI’ is billed as a leap forward, but it feels like a step backwards – Guardian [65]
Age appropriate mini-special
Ages of the people we marry [Interactive] – Flowing Data [66] [h/t Abnormal Returns [62]]
More life advice from a super-smart septuagenarian – Kevin Kelly [67]
Dollar cost average into your health – A Teachable Moment [68]
The surprising data behind super-centenarians [Search result] – FT [69]
Retirees are racing against the clock – Humble Dollar [70]
Man, 110, has simple tips for a long life – Today [71]
Off our beat
Hyperphantasia and the quest to understand vivid imaginations – Guardian [72]
Discipline is underrated – Raptitude [73]
The ‘holiday paradox’: how to slow down time – Life After The Daily Grind [74]
No one buys books – The Elysian [75]
The Silicon Valley gold rush started with… a gold rush – Asterisk [76]
Who should pay when space junk falls through your ceiling? – NPR [77]
“You can even kill them”: the UN and the rise of Singapore – Global Developments [78]
How $61bn in US military aid to Ukraine will flow through the US economy – Yahoo Finance [79]
The 80% solution – We’re Gonna Get Those Bastards [80]
Countries with the largest happiness gains since 2010 [Infographic] – Visual Capitalist [81]
And finally…
“Philosophy and theology give you the perfect background for investing. To succeed at investing, you need a philosophy. Then you’ve got to pray like hell.”
– Shelby Collum Davis, The Davis Dynasty [82]
Like these links? Subscribe [83] to get them every Friday. Note this article includes affiliate links, such as from Amazon [84] and Interactive Investor [85].