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The world of finance is full of anachronisms like this. Exchanges are also closed on various bank holidays which are different in every country.

• em500 4y ago
  Yup, that's why I think that stories about the benefits of having HFTs providing micro-second liquidity are bunk. Even without holidays and weekends, large stock exchanges only operate 7 hours per day, with a 17 hour gap of non-liquidity every day.
• jjoonathan 4y ago
  It's not an anachronism. Liquid markets behave verrry differently from illiquid markets. In liquid markets, "AAPL is $141.23" makes sense. It means that you can expect to buy and sell almost as much AAPL as you want at very close to that price because there are loads of buyers and sellers near that price. You can pretend that AAPL stocks have a price like a lamp at home depot: "I would like 2 AAPL please" is a safe thing to say. In illiquid markets, "AAPL is $141.23" does not make sense. "I would like 2 AAPL please" is not safe at all. There are bids and offers, but not necessarily a lot of them, and not necessarily near each other. If you were to place the "2 AAPL please" order (or something related like "$500 of AAPL please"), you might find that you have purchased 1 AAPL for $141.23 and 1 AAPL for $299.57 because there was a big gap in the order book. The price abstraction completely breaks down and you have to "haggle" with bids and offers directly. "Ok," you might say, "liquidity is important, but surely we can just let the bots provide liquidity at night?" The problem is that markets are adversarial and bots can't really deal with "attacks" as well as humans (or at least the humans staking the money don't trust them to). There is all sorts of craziness that a market-making bot can't handle, and if you encourage people to rely exclusively on market-making bots then they can be taken advantage of (oh no, AAPL is down 50%, better sell, wtf, price shot right back up, rage). It's safer and smarter to just have everyone agree on convenient blocks of time to crowd into the market. During those periods of time the market can be assumed liquid. The price abstraction works. "But I'm a big boy and I want to live in the danger zone, let me trade at night!" Go right ahead. It's not only possible, it's readily available and people do it all the time. You can probably request some degree of after-hours trading from your brokerage right this minute. It's usually pretty easy -- usually you just have to ask for them to enable permission and promise that you know what a limit order is. Usually market orders are disabled, too, because they know that plenty of people would hit "accept," shoot themselves in the foot, and complain anyway :)
  • vjk800 4y ago
    Bots wouldn't be required to provide liquidity during night hours. People living on the other side of the world will do just fine. We live in a global world now and people can buy stocks wherever using the internet, not just in the physical exchange like in the old days.
    • jjoonathan 4y ago
      ...and they can trade after hours just like anyone else who jumps through the minor hoops, yet crazy price action after hours is still an observational facts.
• toast0 4y ago
  > Exchanges are also closed on various bank holidays which are different in every country You can't settle on a bank holiday, because the banks are closed. If you trade on a day you can't settle, you're going to have two days of trading settling on the same day later, which is going to be weird.
  • turbonaut 4y ago
    Weird or not, it happens in spot foreign exchange. For example, if there’s a US holiday on a Friday then EUR/USD trades conducted on the Wednesday and Thursday would both typically settle Monday.
  • vjk800 4y ago
    I count banks as part of the world of finance. Why do bank transactions need to stop during bank holidays? They are done by computers nowadays.
    • toast0 4y ago
      Because the bank is on holiday. That's right there in the name.