There are many considerations tied to trading around the clock, such as when does a day conclude and the next trading day start. It doesn’t necessarily need to be midnight. Additionally, having a brief moment to allow for the industry to process things like dividends and splits and other corporate actions – many of which affect prices – may be necessary as we migrate our procedures to support around the clock markets, writes Phil Mackintosh, Nasdaq’s chief economist.
For example, if a stock is doing a split, limit prices and share quantities will need to change. So, if a company does a 10-for-1 stock split:
- The price should fall to 1/10th of its prior price, so the market cap (valuation) is the same after the split.
- The share quantities to buy and sell should increase by 10x.
- That way the cash required is the same as before the split.
Because of the different times that all the largest stock markets are “officially” open around the world, midnight US time might not be the most logical time to pause the market.
