The London Stock Exchange is racing ahead to create a 24/5 trading venue, while the US plans to discuss preparations for 24-hour overnight trading in equity markets. What are the key drivers of this push for extended trading hours?
Looking at the market as a whole, there are a couple of important factors which are starting to collide: the introduction and adoption of disruptive technologies, for example, distributed ledger technology (DLT) or blockchain, and also agentic AI capabilities. There is a lot of interest from global retail investors — the market as a whole can see, across various geographies, the importance of retail investors for trading and supporting the capital raising process. There are also some new entrants which are coming into financial markets, for example, crypto exchanges, crypto brokers, and those which come from a background where cryptocurrencies and tokenised real-world assets are traded 24/5, or even in some cases 24/7. Some traditional financial markets, such as FX and futures, are already operating typically on a 24/5 basis.
These factors are coalescing, and pulling equities, exchange traded funds (ETFs), and other asset classes, which were traditionally traded during well-defined daily periods, into the realms of trading around the clock. In the US in particular, various overnight alternative trading systems (ATSs) are coming to market and they are seeing a great deal of success, particularly in terms of volumes.
The overall volume of US overnight trading has increased significantly over the last six months — still a small piece of the overall pie, but a growth piece for sure. Around 90 per cent of those volumes that are traded through US overnight ATSs are out of Asia, in particular, places like South Korea.
That reinforces the global demand for securities in other parts of the world. There are investors trying to diversify their portfolios, gain exposure to securities listed in the US or in Europe, as well as market structure changes, which is making incumbents and new entrants into the trading infrastructure world look to see how they can extend to meet the needs of those investors.
Some believe the future of trading is onchain. What are your thoughts on this?
We are working on tokenisation and looking at how tokenisation may work. Our securities digitisation team has been working on a Digital Securities Depository (DSD) — so essentially a digital version of Crest or Clearstream — and an associated digital wallet infrastructure. Tokenisation and the utilisation of DLT is being adopted across financial markets in various guises, and the rate of attention and the proportion of time that various market participants are spending on how tokenisation may impact the business and may evolve, suggests that it is gathering more momentum.
From our perspective, we recognise that transition is not going to occur evenly and in one big bang, rather, there will be some value chain stages and some asset classes which are more predisposed for the deployment of DLT and/or tokenisation of the underlying assets than other asset classes.
The design for LSE 24 — and working in close collaboration with my teammates who are running the securities digitisation efforts on our end — is to ensure that we develop a flexible model that allows us to manage that transition, not just for ourselves and for our markets, but also for our market participants, because they will adopt at different times based on their own bodies of work and what their feelings are in terms of adoption.
How is the new venue, LSE 24, integrating with LSEG’s digital markets infrastructure to provide for always-on digital asset markets?
First and foremost, through the design process and ongoing build and implementation, we are working with our colleagues in securities digitisation, who are working on our Digital Securities Depository (DSD). Embedded in that design will be the ability to settle tokenised assets in the future. We are working on how those interlinkages can occur.
LSE 24 is essentially a new iteration of our existing trading stack, which is 24/5 compliant, and leverages all of the current benefits in terms of capacity and speed in which participants can trade. We have been really specific with our choice of mechanisms for what LSE 24 is, essentially, we are targeting an order book functionality which sits alongside request-for-quote (RFQ) functionality — which is widely used, for example, in ETFs and exchange traded product (ETP) trading.
This is a primary feature of the LSE 24 design, alongside order book client functionality, because liquidity around the clock is not going to be consistent hour upon hour. There will be some peaks and troughs, and having an on-demand liquidity mechanism is better suited to growing that business overnight, in and amongst servicing these peaks and troughs of liquidity. It also confers upon us some flexibility in terms of how existing clearing and settlement will work.
In Europe, we have interoperable central counterparties (CCPs) and they currently do not operate on a 24/5 basis. The model that we have chosen assists in providing flexibility around how that occurs overnight. Our plan is to run a bilateral settlement model when the CCPs are closed; the CCP will then step in again in the morning, bring those trades across, and take on that settlement risk from trades that occurred overnight.
RFQ as a mechanism can be broadly applied across different asset classes. It is less latency sensitive compared to trading equities on a central limit order book, where you measure success in nanoseconds. It is a really flexible model, and so we wanted to make that a main part of our design.
What other benefits of LSE 24 can users expect and how will its design enable users to capture additional opportunities?
We see what some of the US overnight ATSs are doing in terms of their volumes, specifically out of Asia, and we ourselves see significant demand out of Asia for some of our highly liquid ETF and ETP products. These are typically Undertakings for Collective Investment in Transferable Securities (UCITS) funds, and therefore have a wrapper which is tax efficient, particularly for Asian investors getting exposure to whatever the underlying index or security is that the ETF tracks.
From a compliance standpoint, it is an easier structure to take through the clients’ process and then offer up to investors. From a leverage standpoint, in Europe as a whole, UCITS often list products which are three to five times leverage, slightly more than what is available in the US, so there are some real demand factors there for clients, particularly based in Asia, who are looking to get exposure outside of the region, and to do so efficiently through products like ETFs and ETPs.
We are extending the benefits to investors and the demand that we see from those existing investors, to allow them to trade in their own time zone whenever they want.
ETPs will launch as the first asset class on LSE 24 in the first half of 2027, with equities expected to follow. Can you explore the reasoning behind this direction of travel?
From an operational perspective, there are some additional considerations, in terms of trading equities on a 24/5 basis. We want to ensure that our underlying equity issuers, those who are listed on our markets, are prepared, and that between ourselves, regulators, and issuers, we have the agreed model that everybody is comfortable with to manage things like disclosures.
What happens if an equity issuer has a fire in one of their plants and their shares are trading around the clock? What happens in terms of providing notification to market? When does it need to be provided by? ETFs and ETPs are one step removed, given the role that the issuer, fund administrator, custodian, and authorised participants play in managing the listing which can confer some operational efficiencies in a 24-hour context. Also, there already exists significant trading in ETFs and ETPs via RFQ, which is a highly flexible model that can be deployed alongside displayed prices to build direct trading volumes around the clock on a multi-asset class basis.
A move to 24/5 trading is not without challenge, with key considerations required for data, coordination, and managing risk in an always-on market. How will LSE 24 help to navigate this landscape?
Firstly, in terms of running a market around the clock, and while also providing investors and trading participants with confidence around the prices at which they are trading, around liquidity, around trading in an orderly way, in an orderly market — one of the strengths that we bring to the table is that LSEG is truly a global company.
For our market operations and surveillance model, we are going to deploy a follow-the-sun model and leverage our locations around the globe, which allows us to transition and pass the responsibilities of the same platform, same knowledge base, and same rule set, from one region to the next. That is one thing that we are particularly geared up for, maybe more so than our incumbent peers in the US.
In terms of data, the intention is to publish market data around the clock. We have made design choices in terms of how that combination of order book-like mechanism with an RFQ mechanism will work to provide investors or trade participants with the most confidence, in terms of the prices that are being displayed and the prices in which they are trading at. We have thought long and hard and built into our design, for example, where to set price tolerances to make sure that trades occur within a defined tolerance of a reference price, which is a trusted reference price for the market.
We have been focusing a lot on getting that design right and to allow investors to have the confidence to be able to trade around the clock. We have focused on getting the parameters, rules, and operational model right to provide that confidence, and also to de-risk it for trading participants from a clearing and settlement standpoint, being flexible with the current ecosystem and current abilities of trading participants to trade around the clock, and also getting that model right from a liquidity standpoint.
Looking forward, how do you see the future development of LSE 24 and the journey to move to 24/5 trading? How far is the market from 24/7 trading?
Everybody is thinking about 24/7 as an ultimate conclusion for various market participants moving towards 24/5. That brings some further considerations and challenges. First and foremost, the market needs to get equities and equity-like instruments trading on a 24/5 basis. Market infrastructure providers can create capability in the background, and they do not need to switch it on until the market is comfortable and ready.
For us, it is about getting LSE 24 up and running for our clients to start interacting and trading. Obviously, we see some significant demand in Asia. We have a good footprint both on the operational side and also on the sales and business development side in Asia. We have put a lot of hard work into that region previously, and so we are going to leverage that in terms of permissioning and from a client side by making it as easy as possible for them to leverage existing memberships and connections to be able to trade. We have got a pretty flexible and attractive model to drive growth in round-the-clock trading in a logical and pragmatic way.
In many respects, we view this as taking models, technology, infrastructure, and mechanisms that already exist in the market, combining them in a logical way and parameterising them in the right way to fit growth in trading of securities around the clock. We have put a lot of hard work and effort in making specific design choices, but baking-in strategic flexibility.
Last month, LSEG announced plans to launch a new 24/5 trading venue to support the next generation of digital, algorithmic, and agentic trading. Designed to support near-continuous trading from Monday to Friday, LSE 24 will be available for client testing by the end of 2026, with exchange traded products launching as the first asset class in the first half of 2027.
Operating separately from the London Stock Exchange’s Main Market, LSE 24 will leverage the exchange’s Digital Securities Depository (DSD), currently being built with active market engagement. LSEG DSD creates the foundation for the digitisation of issuance, settlement, and asset servicing, therefore enabling greater reach for LSE 24.
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