Nasdaq’s recent rule proposal to expand trading hours for listed equities and exchange-traded products to 23 hours a day, five days a week has prompted some pushback from others on Wall Street who think it’s a terrible idea.  Here’s an excerpt from a recent article in The Street:

A lot of people on Wall Street think this is the wrong answer to a real problem. According to Forbes reporting, Wells Fargo analysts blasted the proposal as “the worst thing in the world,” arguing it would further “gamify” stocks and make equity trading look even more like a casino.

Their core argument is simple: liquidity in U.S. stocks is already heavily concentrated around the opening and closing bells, while off-peak hours are thinner and more fragile.

“Most of the complaints I hear about market structure are about poor volumes,” a Wells Fargo trading desk memo said, questioning why the response is to stretch trading across even more hours.

Jay Woods, chief global strategist at Freedom Capital and a veteran NYSE floor broker, told CNBC that companies and investors need “time to pause” to process information, hold meetings, and release news without an active tape reacting instantly. He warned that nonstop or near-nonstop trading “opens up a new set of challenges,” including burnout for traders and executives and less time for thoughtful decision making.

Concerns include spreading volume over a greater number of hours, which critics fear could lead to wider spreads and greater volatility. That volatility could be exacerbated by market reactions to overnight news, which the article says could result in investors waking up to discover “a stock blasted 10% higher or lower on thin overnight volume, driven more by traders’ knee-jerk reactions than by calm analysis. Critics also cite the higher costs resulting from competitive pressures on banks and brokerages to staff desks for overnight trading.

Proponents of 24/5 trading argue that current practices are out of sync with how people want to trade, and as Liz blogged earlier this year when Nasdaq first revealed its intention to move in this direction, the SEC already approved the “24X Exchange,” which launched in October of this year.

– John Jenkins