The Last Look…

When it comes to 24 hour trading, is 7 better than 5? It’s a question that’s increasingly relevant for FX, as today’s decisions determine tech capabilities in the next decade.

Just a few years ago, equity traders were up in arms about the lack of work-life balance they suffered due to (in their view) unduly long trading hours. Like all good start-ups and narratives, the pivot in financial markets has happened around working hours. Rather than cutting trading days, equities are lumbering towards a 24/7 regime where the idea of one’s weekend can quickly turn into an outdated social construct. 

There is an inevitability to this shift: the New York Stock Exchange (NYSE) recently announced plans to launch a tokenized equity alternative trading system (ATS) as early as Q2 this year, building directly on the SEC’s recent no-action relief granted to the Depository Trust & Clearing Corporation (DTCC) that  allows the DTCC to tokenize every symbol in the Russell 1000 as well as major ETFs, regardless of issuer’s preference. NASDAQ and others, such as CBOE, are also taking steps towards lengthening opening hours. 

The tokenisation of financial assets as collateral is fuelling this momentum while the fractious geopolitical backdrop is highlighting gaps in today’s infrastructure that non-stop markets could solve. US-Iran war breaking out on a weekend? There is a market to hedge risks for that. And boy, they’re popular. On decentralised exchange Hyperliquid, the share of  real-world asset (RWA) perpetuals have overtaken Bitcoin as the largest market with open interest making up $3.6 billion of the nearly $11 billion total. That’s a big increase from nearly zero in just 3 or so months and it highlights the nascent appetite to trade commodities like oil and gold at Sunday brunch time.* 

Where does this leave FX markets? Traditionally the longest continuously trading market, the 24/5 set-up of the current industry sees traders kicking off the global trading day in Auckland on a Monday with sessions running without interruption until staffers sign off at banks on Friday afternoon. As equities and commodities move towards longer trading hours FX will have to, probably, consider its future too.**

This is already happening. Banks are acutely aware that tech investments today have to futureproof systems for tomorrow, where the idea of turning risk systems (for example) off for an hourly update is not going to be the norm. With all the hype around AI, there is another reason for planning non-stop operating hours. As agentic trading takes flight, there will be fewer diary clashes with piano recitals or end of term plays. 

In reality, today’s trading infrastructure isn’t set-up for non stop trading, which major industry players will have to solve both at an in-house and an industry level. This presents a major opportunity for those involved in transitioning infrastructure from one that’s built for around the clock operations and not weekly or daily maintenance downtimes. The settlement piece is slowly being built out. Swift announced recently the launch of a tokenised deposit infrastructure with 17 banks that can settle transactions 24/7. But the trading side is still a puzzle.

Then there is a staffing consideration: will there be a hiring boom as market participants build out weekend teams or will existing employees be expected to work more? And as costs or both human capital and AI mount, is there big enough demand to make it all worthwhile?

As things stand, probably not. For now, the majority of trading at the weekend is coming from retail users, not institutions. But there are two trends that make this unlikely to last: firstly, the participation of retail traders in equity markets has doubled since Covid and they now collectively outnumber hedge funds or banks with their 36% share. This is to say that even retail is pretty big nowadays. Secondly, hedge funds are watching new opportunities that arise from market structure changes, such as the emergence of new, onchain markets or tokenised equities, with great interest while hedging at weekends is increasingly an idea that many find attractive. 

As banks evaluate their role in digital asset and crypto markets, the infrastructure for a 24/7 ecosystem is probably well on its way to being built. When it comes to liquidity, there will be interesting challenges for some and lucrative opportunities for others. Ultimately, how liquid weekend markets will be in FX will boil down to the cost of trading, rather than staffing or technological shortcomings. If activity is lacklustre and liquidity is akin to some of the most illiquid hours of today’s set up, conduct risks will be higher as well as costs. 

But sometimes needs must and having a market, however expensive, is simply preferable to waiting. This leads me to believe that we are on a one-way track towards non-stop FX markets. For the industry, this is a growth opportunity, which should be largely welcomed. On a personal level, it’s exhausting. But maybe the robots will take over. One can only hope they’ll be free at weekends. 

*Readers protesting that institutions can’t trade on Hyperliquid due to regulatory hurdles will be familiar with other, accessible avenues such as crypto exchanges where the brave can hedge risk at the weekend.

**Because Colin is on holiday, I feel it is absolutely necessary to bring up the fix. I have decided to point out the fact that just like in equities markets where the majority of volumes trade in the first and last five minutes of the day, it could be argued that a lot of the trading happens at 4pm in FX. Just because I could, really 🙂