Sec Speeches Cryptocurrency Remarks at the 24-Hour Trading Roundtable

Good morning, ladies and gentlemen, and thank you for joining us today to discuss preparations for expanding 24-hour trading in the U.S. equities markets. Before sharing a few reflections, I must note that the views I express here are my own as Chairman and do not necessarily reflect those of the SEC as an institution or of my fellow Commissioners.

We are moving towards a new day—and night—for our capital markets. Only 20 years ago, when I was last here as a commissioner, there was much angst and gnashing of teeth over proposals to extend U.S. trading hours by mere minutes, not hours. Today, critical business and economic events are not confined to traditional trading hours. When the world reacts in real time to breaking news, waiting to adjust a position or rebalance a hedge until the clock strikes 9:30 on Monday morning may beget missed opportunities or additional risk, especially these days. Instead, many investors are seeking the ability to respond and adjust their positions on an ever-more-frequent basis.

U.S. capital markets are a fount of relentless innovation, and the trading-hours realm is certainly no exception. In fact, trading venues are already responding to investor interest by looking to increase accessibility around the clock. And, as the staff will discuss shortly, some investors are even now trading 24 hours a day on alternative trading systems. If registered U.S. exchanges can evolve to satisfy this increasing appetite and offer additional hours, then greater investor benefit and protection, broader global access, and improved liquidity will likely follow. 

Beyond fulfilling investors’ needs, extending exchange hours could produce many other positive changes. For instance, it is evident that expanded overnight trading would align U.S. exchange hours with those of trading venues overseas, including those for novel financial products. In turn, the U.S. may attract more global capital, drawing increased investment to our shores. Furthermore, investors would be able to react more quickly to events, thereby reducing risk that accumulates overnight or over a weekend, while increasing market efficiency. Indeed, markets benefit when price discovery is not paused or distorted during periods of volatility.

Of course, such a change to our markets must be done thoughtfully and carefully, paying special attention to balancing investor protections with market access. In particular, market infrastructure must be capable of operating around the clock, so that functions that investors and market participants benefit from during the traditional trading day are equally available before dawn. 

So, several needed preparations are already underway or in place. For example, DTCC has gone live with 23 by 5 trade-capture systems to enable clearance and settlement capabilities. The industry has also adopted a plan to establish “overnight price bands” and require all trading centers that are active during overnight hours to establish, maintain, and enforce written policies and procedures that are reasonably designed to prevent trades outside of those bands. Furthermore, work is ongoing to prepare the Securities Information Processor (or “SIP”) plans for overnight price dissemination to promote transparency.

To that end, I am eager to hear how today’s roundtable participants are thinking about overnight operations. For example, market intermediaries that face customers will need to make commercial decisions about what services they will provide overnight. Market activity, meanwhile, may need to expand to raise the incentives to offer various services, such as prime brokerage and securities lending that support market making and institutional participation. 

In the meantime, firms have cited operational challenges in obtaining locates to support market making at a time when spreads may be wide. In this regard, I believe that tokenization holds the potential to help the securities industry achieve real-time inventory management, which could drive efficiency, reduce settlement failures, and mitigate the risk of abusive naked short selling—with the goal of eliminating that possibility altogether. Therefore, I have asked the staff to consider what steps could be taken to dovetail a growth-friendly environment with protections against harmful market behavior.

In light of these considerations, I look forward to an informative conversation today on these topics and others, as some exchanges move towards 24-hour trading.

The work happening across this room is ultimately driven by industry, competitive forces, and investor interest. I am truly excited by your efforts to de-risk our markets and meet investor needs and aspirations—and I am optimistic about what these measures could deliver.

Markets, of course, must serve the needs of issuers whose business is sustained by the very capital that those markets provide, so I would encourage them to engage in this conversation, as well. Specifically, I welcome feedback on how expansion to 24-hour trading may affect public companies’ execution of certain corporate actions, as well as their obligations to disseminate material information to the market and make SEC filings during EDGAR filing hours.

Now, before I turn it over to Jamie Selway, I should like to thank the Division of Trading and Markets for organizing this roundtable, and all of today’s participants for their thoughtful contributions on this important topic. 

I encourage market participants and members of the public to likewise share feedback and submit comments as we consider next steps. Instructions on how to do so can be found on the SEC’s website.

With that, I will hand it over to Jamie Selway, Director of the Division of Trading and Markets. Thank you.