In the ever-evolving landscape of the financial industry, trading platforms are embracing new strategies to cater to the changing needs of investors. Robinhood, a popular trading app, has announced its plans to introduce 24-hour trading for selected stocks and exchange-traded funds (ETFs).
This move reflects a growing trend within the industry to expand trading beyond traditional market hours. By enabling trading during the night, Robinhood aims to provide its users with increased flexibility and accessibility, in an effort to regain its momentum and appeal to investors seeking alternative trading opportunities.
However, this expansion into overnight trading is not without its challenges and considerations.
In this article, we will explore the implications of Robinhood’s decision, the safeguards put in place, and the broader context of overnight trading in the financial market.
Robinhood, the popular American trading app, is set to introduce a new feature that will allow its users to trade Tesla shares during the late-night hours.
The company announced on Wednesday that it will offer 24-hour trading for selected stocks and exchange-traded funds (ETFs) on five days a week.
This move aligns with a growing trend in the financial industry to extend trading beyond the traditional operating hours of Wall Street.
Starting from 8 p.m. ET on Sunday to 8 p.m. ET on Friday, Robinhood plans to enable round-the-clock trading for 43 securities, including well-known stocks such as Amazon.com, Apple, and Tesla.
The rollout of this feature will commence next week, and the company expects all its customers to have access to it by June.
Furthermore, Robinhood intends to gradually expand the availability of overnight trading to encompass more stocks and ETFs, as stated by Chief Executive Vlad Tenev in an interview.
Mr. Tenev believes that enabling 24/7 trading is the next evolutionary step for the market, transforming it into a software-driven system rather than a physical institution tied to limited working hours on the U.S. East Coast.
Robinhood’s decision to offer extended trading hours is aimed at revitalizing the company’s reputation and recovering some of the excitement it had during the pandemic-induced surge in individual investor activity. Since its initial public offering in 2021, Robinhood’s stock has experienced a decline.
In terms of financial performance, Robinhood reported a 47% increase in first-quarter revenue compared to the previous year, leading to a modest rise in its shares during after-hours trading.
However, the company incurred a loss of $511 million for the period, marking its seventh consecutive quarterly loss since going public.
The standard trading hours for U.S. stocks have remained consistent for nearly four decades, running from 9:30 a.m. to 4 p.m. ET, Monday to Friday.
While some brokers offer extended trading sessions that start as early as 4 a.m. ET and end in the evening at 8 p.m. ET, there are limited options for investors who prefer to trade stocks even later at night.
Competing brokerages such as E*Trade and TD Ameritrade currently allow overnight trading between 8 p.m. and 4 a.m. ET, but solely for approximately two dozen ETFs.
Therefore, Robinhood is poised to become one of the pioneering U.S. brokerages to introduce overnight trading for individual stocks, following the footsteps of Interactive Brokers, which implemented a similar feature for certain stocks in April.
By offering 24/5 trading, Robinhood aims to cater to investors who prefer to trade outside of regular market hours, providing them with increased flexibility and accessibility.
This move also aligns with the evolving landscape of the financial industry, where digital platforms and software-driven solutions are becoming more prevalent.
As Robinhood expands its offerings and strives to adapt to changing market dynamics, it seeks to regain its previous momentum and appeal to investors seeking alternative trading opportunities.
Trading outside of regular market hours often experiences low activity, which means that even small bursts of buying or selling can result in significant price fluctuations.
To mitigate risks, Robinhood has implemented safeguards for its customers engaging in overnight trading.
During these hours, users will only be able to place limit orders, where they specify the maximum buying price or the minimum selling price, rather than using riskier market orders.
To facilitate overnight trading, Robinhood will route customers’ stock orders to Blue Ocean, a trading platform that operates a dedicated session from 8 p.m. to 4 a.m. ET. Other U.S. brokers offering overnight trading also utilize Blue Ocean.
In this process, electronic market-making firms like Jane Street Group and Virtu Financial take the opposite side of investors’ orders on Blue Ocean. They aim to profit by buying stocks at slightly lower prices and selling them for a higher price.
Blue Ocean has formed partnerships with prominent Asian brokerages, including Samsung Securities in South Korea and Futu in Hong Kong, to offer their customers access to U.S. stocks during Asian daytime hours.
This collaboration has significantly increased Blue Ocean’s trading volumes, reaching an average of 16.9 million shares per night in April, up from 1.1 million in January.
In a different endeavor, a startup trading platform called 24 Exchange applied for approval from the Securities and Exchange Commission (SEC) to establish the first U.S. stock exchange operating 24/7, including on weekends and holidays.
However, the company withdrew its application in February, citing the need for additional time to address certain outstanding matters. One of the main concerns was how 24 Exchange would connect to public data feeds that disseminate price information from all U.S. stock exchanges. These data feeds, known as securities information processors (SIPs), do not operate overnight. Unlike a full-fledged exchange, Blue Ocean is not obligated to report stock-quote data to the SIPs.
Regarding 24 Exchange’s withdrawal, a spokesperson stated that the company is actively working with the SEC to resolve these outstanding issues and intends to resubmit its application once they are addressed satisfactorily.
To conclude, the move by Robinhood to introduce 24-hour trading by Robinhood represents a significant step toward reshaping the traditional boundaries of the financial market.
By providing access to trading during late-night hours, the platform aims to accommodate the needs of investors who prefer to trade outside of regular market hours, enhancing their ability to seize investment opportunities and manage their portfolios.
However, this expansion also brings challenges and considerations, such as the potential for increased volatility and the need for safeguards to mitigate risks. As Robinhood rolls out this new feature and other platforms explore similar avenues, the financial industry will continue to adapt and innovate, driven by the growing demand for accessibility, flexibility, and seamless trading experiences.
Ultimately, the success of 24-hour trading will depend on striking the right balance between convenience and risk management, as well as addressing the evolving needs and expectations of investors in an increasingly interconnected global market.
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