Citadel Securities has submitted a 29-page letter to the U.S. Securities and Exchange Commission outlining a wish list for capital markets regulation, with a focus on the risks posed by planned 24-hour trading. The market maker, which handles approximately $570 billion in daily volume, urged the SEC to establish a clear regulatory framework and robust infrastructure to support extended trading hours, emphasizing the need for consistent date conventions across platforms.
Exchanges including Nasdaq (NDAQ), Cboe Global Markets (CBOE) and Intercontinental Exchange (ICE) have announced initiatives to extend trading into overnight sessions. Citadel highlighted that without standardized rules and resilient systems, overnight markets could face liquidity gaps, mismatched settlement cycles and heightened operational risks.
Market Overview:- Citadel warns SEC on 24-hour trading risks and infrastructure gaps.
- Proposals include standardized date conventions and enhanced system resilience.
- Exchanges planning extended hours include Nasdaq, Cboe and ICE.
- Call for tighter rules on “private rooms” to ensure fair access and transparency.
- Requests faster disclosure of block trade sizes in corporate bond markets.
- Recommendations cover equities, derivatives, treasuries, credit and digital assets.
- Regulatory action on extended hours could reshape market structure.
- Enhanced oversight of alternative trading systems may boost investor confidence.
- Rollout of 24-hour trading dependent on SEC guidance and technological upgrades.
- Citadel’s proactive engagement with the SEC could help shape a robust regulatory framework for 24-hour trading, reducing systemic risks and ensuring a smoother rollout of extended trading hours.
- Standardized date conventions and enhanced infrastructure, as advocated by Citadel, may foster greater market stability, transparency, and operational efficiency across equities, derivatives, treasuries, and digital assets.
- By calling for tighter oversight of “private rooms” and faster corporate bond trade disclosures, Citadel’s proposals could level the playing field, improve price discovery, and boost investor confidence in both equity and fixed-income markets.
- Successful SEC action on these recommendations could position U.S. capital markets as global leaders in innovation, attracting more trading volume and reinforcing the competitiveness of exchanges like Nasdaq, Cboe, and ICE.
- Enhanced regulation and oversight may mitigate concerns about liquidity gaps, settlement mismatches, and operational risks, supporting the safe expansion of round-the-clock trading for both institutional and retail investors.
- Citadel’s warnings highlight the real risk that 24-hour trading could introduce liquidity gaps, increased volatility, and operational errors, especially during overnight sessions with thinner participation.
- Without clear and consistent SEC regulation, extended trading hours may exacerbate fragmentation, settlement mismatches, and transparency issues-potentially harming retail investors and undermining market integrity.
- Calls for tighter rules on “private rooms” and faster block trade disclosures could face industry resistance and delay, limiting the effectiveness of Citadel’s proposals and prolonging regulatory uncertainty.
- The complexity of implementing robust infrastructure and standardized conventions across platforms may lead to costly delays, technical failures, or unintended consequences for market participants.
- If the SEC fails to act decisively or if exchanges move ahead without adequate safeguards, the risks of operational disruptions, unfair access, and reduced investor trust could outweigh the benefits of 24-hour trading.
Citadel also urged the SEC to scrutinize alternative trading systems known as “private rooms,” which limit participant access and operate without full transparency. In the fixed-income sector, the firm called for expedited reporting of large corporate bond trades to improve price discovery.
With former SEC member Paul Atkins now serving as chairman, Citadel’s proposals arrive at a pivotal moment for U.S. market regulation. How the Commission responds to calls for extended trading oversight and greater transparency will signal its approach to balancing innovation with investor protection.
