3 ms·

Most trading happens just after market open (reflecting information released since the market closed the previous day) and just before market close (because end

by pavlov 3y ago

Most trading happens just after market open (reflecting information released since the market closed the previous day) and just before market close (because end-of-day prices are important in many contexts). So maybe there could instead be a chill stock exchange which is open for just two brief 15-minute windows, one in the New York morning and another in the evening.

thriftwy 3y ago
That's not stupid. Perhaps you could only place orders to be traded "at start" or "at end" beforehand, and they will be all processed at once.
crazygringo 3y ago
Ha! That's actually... not a terrible idea. It's not really clear that it serves any societal purpose to have trading all day long. It's just a lot of traders super glued to the news and trying to react instantly. And trades take a couple of days to settle anyways. I'm really curious if anyone can point to important economic efficiences that would be lost if trading was restricted to two 15-minute windows per day.
- lucianbr 3y ago
  Wouldn't it be more relevant to reduce the time it takes to settle trades? That seems anachronistic, like sending checks by snailmail. We have so many computers in the 21st century, and most money is digital already. Does settling/clearing on a delay actually serve a purpose, or just enables someone to collect rent?
  - collinmcnulty 3y ago
    It serves the purpose of bringing all the market participants together to have the deepest market at the time of trading. This prevents pricing swings based on who happens to want to trade right this minute. Trading more frequently actually allows brokers to collect rents in the form of a spread for the “service” of buying from you now and selling to me later. If we had a daily auction, we could avoid the need for such a broker spread.
    - toomuchtodo 3y ago
      Supporting citation: https://www.bloomberg.com/news/articles/2024-04-29/stocks-trade-for-390-minutes-a-day-increasingly-only-10-matter https://www.bloomberg.com/news/articles/2024-04-29/stocks-tr... | https://archive.today/C5LVD https://archive.today/C5LVD ("Bloomberg: Stocks Trade for 390 Minutes a Day. Increasingly, Only 10 Matter")
  - tonfa 3y ago
    > Does settling/clearing on a delay actually serve a purpose, or just enables someone to collect rent? It removes friction from the market since it gives time to line things up between market participants. For example if some assets are on loan, it gives time to the people who were borrowing it to find some other market participant to borrow it from. https://www.bloomberg.com/opinion/articles/2024-02-28/trading-stock-takes-time https://www.bloomberg.com/opinion/articles/2024-02-28/tradin... was a good explainer
    - lucianbr 3y ago
      It's funny that the article explaining why it is good and necessary to have T+2 settlement also mentions that markets are moving to T+1 settlement. To me that seems like a contradiction. Must be my cluelessness talking.
      - tonfa 3y ago
        It's going to be a tradeoff in any case (T+2 requires more collateral but gives more times to line things up for settlement)
- xhkkffbf 3y ago
  While I also agree that there are downsides to keeping the exchange constantly churning, I worry that it's hard to align the open moments with the times when market-shifting news arrives. We can't expect the Bhopal plant to explode just in the 15 minutes when Dow Chemical is active. Still, I agree that we need to think again about the focus on hyper liquidity. When I see high speed trading, I feel like it's just an endless competition to steal the bid-ask spread from the suckers who are actually trading.
  - pavlov 3y ago
    > “I worry that it's hard to align the open moments with the times when market-shifting news arrives. We can't expect the Bhopal plant to explode just in the 15 minutes when Dow Chemical is active.” With the current system there’s only a 27% chance that global news arrives when the world’s most important market is open. It’s practically a completely arbitrary number. So it might be more fair to everyone to either reduce the number to a minimum, or expand it to as close to 100% as possible.
  - crazygringo 3y ago
    But that's the whole point -- that most news doesn't happen during trading. That you have ample time to digest the news from overnight to trade in the morning, and ample time to digest the news from the day to trade at the end of the day. There's definitely importance for prices to change daily in response to news. I'm questioning any economic or societal need for prices to change by the second/minute, or even hour, in response to news. All it does is funnel some extra profits to professional traders who watch the markets and are subscribed to every news alert, and disadvantage everyone else who just stays on top of industry/market news like a normal person.
- snapplebobapple 3y ago
  It would be annoying from a user perspective because i would have to be at a computer for only those fifteen minutes when i wanted to rebalance my portfolio or risk automated buys and sells working properly. it would probably change the value/ reaction to information assymetry which might be good or bad. It would probably decrease opportunity for me to buy stocks i like at a lower price by sitting on bids and waiting for the random walk to push the price down to my bid just due to noise.
  - toomuchtodo 3y ago
    Limit orders. Can always modify your order for the next trade window if something unexpected occurs wrt price action, preventing order fulfillment.
andsoitis 3y ago
> So maybe there could instead be a chill stock exchange which is open for just two brief 15-minute windows, one in the New York morning and another in the evening. Typically, more shares trade in the first hour than during any other, as orders placed when the market was closed are processed.
nobodyandproud 3y ago
Pretty cool idea. It’s effectively a day-cadence stock exchange. This would make for a fairer market than what we have now.
- tivert 3y ago
  > Pretty cool idea. It’s effectively a day-cadence stock exchange. > This would make for a fairer market than what we have now. It would also give people time to think, instead of pushing them to automated trading based on NLP processing of headlines.
  - nobodyandproud 3y ago
    This is also true. Intraday trade halts happen on occasion and for good reason, and removing a natural brake would lead to further exploitation and problems. The IEX stock exchange was made to make longer term trade more attractive but I think the vision was too limited to have the impact they were hoping to have.
al_borland 3y ago
This would likely making prices very erratic, as people would fight to get their shares bought or sold in that window by selling below, or buying above, what they would otherwise look to buy/sell it.
samatman 3y ago
I've had a similar idea. The basic premise is that each company's stock trades once a day, at most, in a Dutch auction. On the sell side, you inform the market that you'll be placing stock in a company on sale, and it sells at a known time, before which you can withdraw intent to sell. On the buy side, you can place and withdraw bids at any time, and when the auction starts, those bids are part of the auction. This works as a price signal to draw sellers in, or convince them to withdraw. The price paid for all the stock is pooled, and each seller gets a share proportional to what they sold. This would eliminate HFT (good), and should allow for price discovery and other useful market forces to do their work. It would chill out the market and dispose of the heady cocaine-fueled paper-chasing casino aspect of it. The market would converge on a daily agreement about the stock price of that company, without all the random walks and HFT coin shaving, which is not economically productive behavior.
- a-dub 3y ago
  look up "frequent batch auctions" -- same idea but on shorter timescales.

by pavlov 3y ago

thriftwy 3y ago

That's not stupid. Perhaps you could only place orders to be traded "at start" or "at end" beforehand, and they will be all processed at once.

crazygringo 3y ago

Ha! That's actually... not a terrible idea. It's not really clear that it serves any societal purpose to have trading all day long. It's just a lot of traders super glued to the news and trying to react instantly. And trades take a couple of days to settle anyways. I'm really curious if anyone can point to important economic efficiences that would be lost if trading was restricted to two 15-minute windows per day.

lucianbr 3y ago
Wouldn't it be more relevant to reduce the time it takes to settle trades? That seems anachronistic, like sending checks by snailmail. We have so many computers in the 21st century, and most money is digital already. Does settling/clearing on a delay actually serve a purpose, or just enables someone to collect rent?
- collinmcnulty 3y ago
  It serves the purpose of bringing all the market participants together to have the deepest market at the time of trading. This prevents pricing swings based on who happens to want to trade right this minute. Trading more frequently actually allows brokers to collect rents in the form of a spread for the “service” of buying from you now and selling to me later. If we had a daily auction, we could avoid the need for such a broker spread.
  - toomuchtodo 3y ago
    Supporting citation: https://www.bloomberg.com/news/articles/2024-04-29/stocks-trade-for-390-minutes-a-day-increasingly-only-10-matter https://www.bloomberg.com/news/articles/2024-04-29/stocks-tr... | https://archive.today/C5LVD https://archive.today/C5LVD ("Bloomberg: Stocks Trade for 390 Minutes a Day. Increasingly, Only 10 Matter")
- tonfa 3y ago
  > Does settling/clearing on a delay actually serve a purpose, or just enables someone to collect rent? It removes friction from the market since it gives time to line things up between market participants. For example if some assets are on loan, it gives time to the people who were borrowing it to find some other market participant to borrow it from. https://www.bloomberg.com/opinion/articles/2024-02-28/trading-stock-takes-time https://www.bloomberg.com/opinion/articles/2024-02-28/tradin... was a good explainer
  - lucianbr 3y ago
    It's funny that the article explaining why it is good and necessary to have T+2 settlement also mentions that markets are moving to T+1 settlement. To me that seems like a contradiction. Must be my cluelessness talking.
    - tonfa 3y ago
      It's going to be a tradeoff in any case (T+2 requires more collateral but gives more times to line things up for settlement)
xhkkffbf 3y ago
While I also agree that there are downsides to keeping the exchange constantly churning, I worry that it's hard to align the open moments with the times when market-shifting news arrives. We can't expect the Bhopal plant to explode just in the 15 minutes when Dow Chemical is active. Still, I agree that we need to think again about the focus on hyper liquidity. When I see high speed trading, I feel like it's just an endless competition to steal the bid-ask spread from the suckers who are actually trading.
- pavlov 3y ago
  > “I worry that it's hard to align the open moments with the times when market-shifting news arrives. We can't expect the Bhopal plant to explode just in the 15 minutes when Dow Chemical is active.” With the current system there’s only a 27% chance that global news arrives when the world’s most important market is open. It’s practically a completely arbitrary number. So it might be more fair to everyone to either reduce the number to a minimum, or expand it to as close to 100% as possible.
- crazygringo 3y ago
  But that's the whole point -- that most news doesn't happen during trading. That you have ample time to digest the news from overnight to trade in the morning, and ample time to digest the news from the day to trade at the end of the day. There's definitely importance for prices to change daily in response to news. I'm questioning any economic or societal need for prices to change by the second/minute, or even hour, in response to news. All it does is funnel some extra profits to professional traders who watch the markets and are subscribed to every news alert, and disadvantage everyone else who just stays on top of industry/market news like a normal person.
snapplebobapple 3y ago
It would be annoying from a user perspective because i would have to be at a computer for only those fifteen minutes when i wanted to rebalance my portfolio or risk automated buys and sells working properly. it would probably change the value/ reaction to information assymetry which might be good or bad. It would probably decrease opportunity for me to buy stocks i like at a lower price by sitting on bids and waiting for the random walk to push the price down to my bid just due to noise.
- toomuchtodo 3y ago
  Limit orders. Can always modify your order for the next trade window if something unexpected occurs wrt price action, preventing order fulfillment.

andsoitis 3y ago

> So maybe there could instead be a chill stock exchange which is open for just two brief 15-minute windows, one in the New York morning and another in the evening. Typically, more shares trade in the first hour than during any other, as orders placed when the market was closed are processed.

nobodyandproud 3y ago

Pretty cool idea. It’s effectively a day-cadence stock exchange. This would make for a fairer market than what we have now.

tivert 3y ago
> Pretty cool idea. It’s effectively a day-cadence stock exchange. > This would make for a fairer market than what we have now. It would also give people time to think, instead of pushing them to automated trading based on NLP processing of headlines.
- nobodyandproud 3y ago
  This is also true. Intraday trade halts happen on occasion and for good reason, and removing a natural brake would lead to further exploitation and problems. The IEX stock exchange was made to make longer term trade more attractive but I think the vision was too limited to have the impact they were hoping to have.

al_borland 3y ago

This would likely making prices very erratic, as people would fight to get their shares bought or sold in that window by selling below, or buying above, what they would otherwise look to buy/sell it.

samatman 3y ago

I've had a similar idea. The basic premise is that each company's stock trades once a day, at most, in a Dutch auction. On the sell side, you inform the market that you'll be placing stock in a company on sale, and it sells at a known time, before which you can withdraw intent to sell. On the buy side, you can place and withdraw bids at any time, and when the auction starts, those bids are part of the auction. This works as a price signal to draw sellers in, or convince them to withdraw. The price paid for all the stock is pooled, and each seller gets a share proportional to what they sold. This would eliminate HFT (good), and should allow for price discovery and other useful market forces to do their work. It would chill out the market and dispose of the heady cocaine-fueled paper-chasing casino aspect of it. The market would converge on a daily agreement about the stock price of that company, without all the random walks and HFT coin shaving, which is not economically productive behavior.

a-dub 3y ago
look up "frequent batch auctions" -- same idea but on shorter timescales.