Online brokerage firm Robinhood, which revolutionized the industry and recently had a successful initial public offering, announced it would extend its trading hours to from 7 a.m. until 8 p.m. That will allow its mostly novice customers the option to trade during periods when the traditional markets are closed.
In its announcement, Robinhood management said: “Robinhood was built to revolutionize the markets and bring more people into our financial system. That’s why Robinhood is working towards offering 24/7 investing — giving customers unprecedented access to the financial markets.”
Traditional markets like the New York Stock Exchange have considered 24-hour trading for decades. However, the appetite for this has been small. Although stocks and market futures often trade outside these times, the volume is almost always less than modest. That means a small number of investors can drive swings in prices that would not happen during the traditional trading day. Robinhood traders already contribute to unexplained and often unjustified jumps and drops in stocks prices. Why encourage that over the course of a longer period?
Robinhood needs something to jumpstart its stock price which has collapsed shortly after it went public. Today, it trades at about $16, compared to its 52-week high of $85. Trading volume in the stock is huge, at an average of about 20 million shares a day. The extended trading announcement did bump the shares up, but that likely will evaporate as investors return to the reality that Robinhood has little to recommend itself as a company that deserves a higher price.
Robinhood may have revolutionized how people play the market. However, extended hours will not enhance that reputation.
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