TheCorporateCounsel.net

Over on The Cooley Governance Blog, Broc recently posted about some of the key takeaways from the SEC’s roundtable on 24-hour trading.  Among other things, panelists indicated that retail investors are likely to lead the way when it comes to overnight trading, while institutional investors are likely to be more cautious. According to this excerpt, however, issuers are the most cautious market participants when it comes to 24-hour trading:

The issuer perspective was notably more cautious. Thin overnight liquidity could permit relatively small trades to create large price movements that may not reflect fundamental value or broad investor sentiment, with potential consequences for long-term shareholders and index-related considerations.

Extended trading also may affect when companies release earnings and other material information, since issuers traditionally have considered the availability of deep liquidity when timing disclosures. The issuer representative advocated greater public-company participation in developing volatility protections and other market-wide guardrails. The notes also flag for consideration whether issuers should develop escalation or overnight-monitoring procedures around significant anticipated events.

The blog reports that the issuer discussion placed 24-hour trading within the broader debate over the health of U.S. public markets. While participants noted that increased international participation could make U.S. markets more attractive, the cost and complexity associated with public company status and raising capital in the public markets raised more fundamental concerns.

Accordingly, the key from an issuer perspective isn’t whether longer trading hours generate greater trading volumes, but whether they improve issuers’ ability to raise capital, provide liquidity to investors, and support stable valuations.

– John Jenkins