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We live in a world that demands everything to be fast and instantly accessible, so it is no surprise investors are pushing for 24-hour financial markets. US regulators have already approved Nasdaq’s proposal to offer 23-hour trading. In Asia, there is a push in Hong Kong to explore 24-hour trading to maintain its global competitiveness, while the Korea Exchange is similarly pushing to extend its hours.

But is 24-hour trading a simple issue of accessibility? Let’s unpack a few reality checks.

Stock markets traditionally operate during the day. In Hong Kong, that means 5½ hours from Monday to Friday (9.30am to 4.00pm), with a one-hour lunch break. Trading volume has long been concentrated around the opening and closing auctions (a “liquidity smile”). But recently, the rise of ETFs and index funds has morphed this into a “liquidity smirk”, with the vast majority of volume crammed into the final 30 minutes because funds tend to buy or sell near the closing price, which acts as the official daily benchmark.

If we shift to 24-hour trading, when exactly is the close? What becomes the reference point for the trillions of dollars in passive funds? Alternatively, if we maintain the existing closing price mechanism, how is this any different from standard after-hours trading, apart from being longer?

Furthermore, stretching trading across 24 hours dilutes liquidity. Thinner liquidity cripples price discovery and exacerbates volatility. Regulators could force market makers to offer quotes around the clock, but they aren’t charities. Low liquidity means fewer matching buy and sell orders, forcing market makers to hold risky positions on their books for longer – which may come back to bite investors in the form of wider spreads and higher trading costs.