The Nasdaq 24-Hour Trading Shift and Its Implications for Retail and Institutional Investors

The Nasdaq's proposed 23/5 trading model, set to launch in the second half of 2026, marks a pivotal evolution in U.S. equity market structure. By extending trading hours to 23 hours daily-divided into a Day Session (4:00 a.m. to 8:00 p.m. ET) and a Night Session (9:00 p.m. to 4:00 a.m. ET), with an 8:00 p.m. to 9:00 p.m. technical pause-Nasdaq aims to address global demand for continuous access to regulated markets while navigating operational and liquidity challenges according to Nasdaq's official announcement. This shift reflects broader industry trends, as competitors like Cboe and NYSE Arca also explore extended hours, and it raises critical questions about how retail and institutional investors will adapt to a redefined liquidity landscape.

Market Structure Evolution: A Global Push for 24/5 Trading

The move toward extended trading hours is not unique to Nasdaq. Cboe's EDGX Equities Exchange, for instance, introduced early hours trading in 2021, capturing 1% of Total Consolidated Volume (TCV) by 2024. Similarly, Eurex expanded its benchmark futures trading into Asian time zones in 2018, incentivizing liquidity providers to align with global business cycles. These initiatives highlight a shared industry imperative: to accommodate investors in regions like Asia, where demand for overnight access has historically been met through fragmented, off-exchange venues.

Nasdaq's 23/5 model, however, introduces a more ambitious framework. By structuring trading around a 24×5 calendar-effectively spanning Sunday at 9:00 p.m. to Friday at 8:00 p.m. ET-it redefines trade date boundaries. Crucially, trades executed between 9:00 p.m. and 12:00 a.m. ET will be classified as occurring on the following day, a change with significant implications for settlement, reconciliation, and regulatory reporting. This structural shift mirrors efforts by Securities Information Processors (SIPs) to align with extended hours, while DTCC's Universal Trade Capture system prepares to support 24×5 trade processing by mid-2026.

Liquidity Dynamics: Opportunities and Risks in Extended Hours

Extended trading hours inherently alter liquidity dynamics. During non-core sessions, bid-ask spreads tend to widen, and order flow becomes more fragmented. For example, Cboe's early hours trading sees a surge in volume at 4:00 a.m. ET, driven by queued orders placed as early as 2:30 a.m. ET while after-hours liquidity remains relatively flat. This pattern suggests that liquidity in Nasdaq's Night Session may be thinner than in the Day Session, particularly during the late-night hours when retail participation is minimal.

Institutional investors, equipped with advanced tools and access to real-time data, are better positioned to exploit these dynamics. Research indicates that institutions often leverage extended hours to execute large orders discreetly, avoiding market impact during core sessions. Conversely, retail investors face structural disadvantages. During periods of market divergence-such as the 2025 selloff-retail traders have shown a tendency to misinterpret signals, maintaining bullish positions even as institutions adopt caution according to JPMorgan analysis. Extended trading may exacerbate this gap, as retail investors navigate wider spreads and slippage during low-liquidity periods.

Implications for Retail and Institutional Investors

For retail investors, the 23/5 model offers both flexibility and risk. On one hand, it enables participation in global market events, such as Asian earnings reports or geopolitical developments, without relying on fragmented venues. On the other, it demands greater discipline. Retail traders may struggle with the psychological and technical challenges of trading during non-traditional hours, particularly when liquidity is scarce. As noted in academic studies, retail participation in Cboe's early hours trading has grown significantly, with over half of EDGX's premarket share now comprising retail attested orders. This trend underscores the need for robust risk management frameworks tailored to retail strategies.

Institutional investors, meanwhile, stand to benefit from enhanced market relevance. The ability to trade continuously across time zones allows them to capitalize on global arbitrage opportunities and respond swiftly to international macroeconomic data. However, this advantage comes with operational complexity. Institutions must adapt their clearing and settlement systems to accommodate the 24×5 calendar, a process DTCC is already preparing for. Additionally, they must refine execution strategies to account for off-hours volatility and liquidity patterns, ensuring that trades during the Night Session align with portfolio objectives.

Conclusion: A New Era of Market Participation

Nasdaq's 23/5 model represents a bold reimagining of U.S. equity market structure, driven by global demand and competitive pressures. While it promises greater accessibility, it also introduces complexities that will test the adaptability of both retail and institutional investors. For retail participants, the key will be balancing flexibility with risk management, while institutions must leverage their technological and informational advantages to navigate the evolving landscape. As the industry moves toward 24×5 trading, regulatory frameworks and market infrastructure will play a critical role in ensuring transparency and stability. The coming years will reveal whether this shift ultimately democratizes access to global markets or deepens existing asymmetries.