Securities market participants will have to make a number of changes to their operations if they are to handle a move to 24/7 trading.
This is the warning that has been issued by the World Federation of Exchanges (WFE) amid a debate about the relative merit of extended trading hours.
Thanks to the development of tokenisation, the prospect of a securities market that is open around the clock has become a distinct possibility. However, the WFE says that a move to extended trading hours is "not inevitable nor universally desirable".
It comes with a number of key considerations about the impact on liquidity, market structure, risk and security and operational models.
The paper, titled Policy and Market Impacts of Extended Trading, states that extended trading hours is "technologically feasible and in some cases aligns with investor demand". However, its adoption must be "carefully calibrated to preserve market integrity, investor protection and systemic stability".
From a technology perspective, this means exchanges, clearing houses and brokers must adapt their systems for periods of high availability, realtime risk controls and continuous surveillance
There will also be post trade concerns to address, such as installing ssyetms that can handle 24/7 data feeds, strengthening supervisory frameworks and managing risk in periods of low liquidity.
The market will also need to consider the needs and wishes of the issuers of securities, states the paper, suggesting that moving to a 22/5 or 23/5 environment would be a more sensible next step as opposed to a move straight to round-the-clock trading.
This would allow for a "pragmatic path forward" that enables exchanges to meet rising demand while testing operational readiness before the move to continuous trading.
According to Nandini Sukumar, CEO of the WFE, the paper is not a prescription for 24/7 markets, but a blueprint for how to get there, should the market choose to do so.
"The shift to extended trading is technologically feasible and already aligned with investor behaviour in other asset classes," said Sukumar.
"The real question is how markets evolve in a way that protects investors, supports integrity, and strengthens global competitiveness. Any shift must be ecosystem-wide, coordinated across custodians, settlement banks, brokers, and regulators.”