What advantages could blockchain powered stock trading have during times of market sell-offs?

By Vanessa Malone

This past Monday morning, the Dow Jones Industrial Average fell more than 1,000 points.¹ The Nikkei 225, an index of leading stocks in Tokyo, closed down 5.8% Friday, and then 12.4% on Monday.²

With traditional stock trading hours, an entire weekend passed with traders eagerly awaiting the market’s reopening to buy or sell at the new prices. This scenario prompts the question of how different the landscape would be if all stock markets operated with 24/7 trading and instantaneous settlement.

Traditional markets are limited to regular business hours, in local time, due to the need for human oversight, but blockchain markets are self-sufficient and operate continuously, driven by smart contracts.

If stock markets were powered by blockchain technology, such as Horizon’s Ethereum-based platform which underpins the Upstream stock trading app part of MERJ Exchange, this model becomes feasible. Upstream, for example, gives traders the ability to transact on all of our issuers listed equities irrespective of time of day. Blockchain never sleeps.

So what advantages could blockchain powered trading have during times of market sell-offs?

  1. Immediate Responses to Market News. For example, if a retail investor was informed on Friday after market hours about the global dip, they could capitalize on the news immediately and place a sell order with the opportunity to be executed immediately, locking in a price based on the current market conditions. This could potentially avoid unwanted losses. On the other side, the trader could also take advantage of the dip and buy. In the current market, the investor had to wait until Monday, during which time the market may have already reacted.
  2. Less Gaps in Market Opening Prices. News that issuers publish outside of trading hours can cause spikes and dips overnight or over the weekend. This could mean trades executing at a much lower price if the news was negative. With the ability to trade immediately, investors can execute their trades with more transparent, predictable pricing. Further, with transparent orderbooks like on Upstream, best bids and offers are publicly displayed.
  3. Instantaneous Settlement Means Capital can be Reallocated more Quickly. With instant settlement like what happens on Upstream, funds are immediately available for further trading. In traditional markets, settlement just recently went from two days (T+2) to one day (T+1) for some markets, but that delay could still result in missing out on other investment opportunities. 
  4. Empowering Retail Investors. In moving to a 24/7 model with real-time trading and instantaneous settlement, retail investors are empowered to place orders at their convenience and potentially manage their investments more effectively in volatile conditions. A concern over 24/7 access could be the problem of panic selling when news comes out. According to Axios and data from Interactive Brokers, many retail investors took advantage of Monday’s sell-off to buy instead of run out of the market.³

24/7 trading is already a reality in crypto markets, and markets are actively looking into what a 24/7 model would look like for securities trading. Retail brokers like Robinhood and Interactive Brokers are already appeasing traders with expanded trading hours through internal matching or dark pools. We believe aligning securities trading with this model is more of a matter of when, not if. The technology and demand is there and growing. A global, interconnected market could be on the Horizon.

Sources 1 NPR | 2 CNN | 3 Axios

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