Wall Street: Stocks trade for 390 minutes a day but only the final 10 matter

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Assets in passive equity funds have surged to more than $US11.5 trillion in the US alone - pushing more of trading to the closing minutes of the equities session.

Already a subscriber?The regular market for US equities runs for 390 minutes on a standard trading day. But at the rate things are going, eventually the last 10 might be the only ones that matter.

The closing auction in Europe, which occurs after the end of regular trading, now accounts for 28 per cent of volumes on public venues, up from 23 per cent four years ago, data from Bloomberg Intelligence and analytics firm big xyt show.

The charge is one of a number levelled against passive investing, including that it can blindly inflate company valuations and wreak havoc when major indexes rebalance, triggering billions in one-way trades. The litany of concerns has inspired high-profile attacks fromBut the extent to which any closing distortions should cause concern is uncertain and, as with so much in the modern market, the debate isn’t clear cut.

Meanwhile, two other researchers — Carole Comerton-Forde at the University of Melbourne and Barbara Rindi at Bocconi University — concluded in 2022 that ostensible European reversals might be due to noise at the market open, rather than distortions, and that intraday liquidity hasn’t been hurt by the closing auction. Writing on behalf of the duo, Comerton-Forde said regulators don’t have cause for concern yet, “but should continue to watch this space in case things change.

 

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