After-hours trading of US stocks has surged among investors in Asia, signaling a significant shift towards round-the-clock trading in global equities markets.
Rise in After-Hours Trading Activity
Data from Blue Ocean Technologies LLC reveals that after-hours trading volumes in 2024 have quadrupled, with about 80% of the platform’s revenues coming from Asian clients. This surge reflects growing demand for extended trading hours, as Asian investors seek to respond to macroeconomic news and key policy announcements.
Key policy developments, particularly from Beijing, played a major role in shaping the performance of Chinese stocks listed in the US. Additionally, the constant social media updates from former President Donald Trump have contributed to a shift in trading habits, prompting more investors to engage in after-hours trading.
The Push for 24/7 Trading
Fabian Rijlaarsdam, CEO of Asia at Flow Traders Ltd., noted that investors are increasingly adopting a 24/5 or even 24/7 mindset. “There’s an increased demand for immediacy, whether it’s a tweet from Trump or the release of Nvidia’s earnings,” he said, highlighting the influence of real-time events on market movements.
Challenges of Off-Peak Trading
Despite the growing interest in after-hours trading, there are notable challenges. The lack of liquidity during off-peak hours means that stocks and exchange-traded funds (ETFs) traded overnight are less liquid. As a result, the spread between the bid and ask prices tends to widen, making trading more costly and less efficient.
Louis Navellier, founder of Navellier & Associates Inc., described the situation as akin to “the Wild West” due to the absence of adequate liquidity, making after-hours trading riskier for investors.
Global Exchanges Respond to the Demand
In response to the rising demand for extended trading hours, global exchanges are experimenting with longer trading periods. Nasdaq Inc. announced plans to offer 24-hour equities trading, following a similar move by Cboe Global Markets Inc. Meanwhile, the New York Stock Exchange has requested regulatory approval to extend its trading hours to 22 hours.
Growing Interest Among Retail and Institutional Investors
Both retail and institutional investors in Asia are increasingly engaging in after-hours trading. Flow Traders reported a nearly doubling of request-for-quote volumes for US ETFs from Asian institutional investors since 2021. These trades allow investors to request prices from multiple market makers, further enhancing liquidity and flexibility.
The rise of after-hours trading in Asia is reshaping the global equities market, offering new opportunities while also introducing potential risks for investors.
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