Charles Schwab has expanded its 24-hour trading capabilities to all retail clients, following a successful pilot program conducted from November through January.
This initiative allows clients to trade stocks from the S&P 500 and Nasdaq-100, as well as hundreds of additional exchange-traded funds (ETFs), 24 hours a day, five days a week, via the thinkorswim® platform suite.
The decision to broaden trading hours reflects Schwab's commitment to adapting to the evolving investing landscape and providing clients with greater flexibility. James Kostulias, Managing Director and Head of Trading Services at Charles Schwab, stated, "In today’s world, market-moving news doesn’t wait for standard market hours, and retail traders know what a difference it can make to have access to the markets when volatility spikes."
During the pilot, the most active trading periods were between 8 p.m. and 9 p.m. Eastern Time, and 3 a.m. and 4 a.m. Eastern Time. Clients predominantly traded high-profile stocks such as Tesla, Nvidia, Palantir Technologies, MicroStrategy, and Advanced Micro Devices. Notably, there was significant engagement from international clients, particularly those in Asia.
This move aligns Schwab with other brokerage firms like Robinhood and Interactive Brokers, which also offer 24-hour trading services. It's noteworthy that TD Ameritrade, acquired by Schwab in 2020, was the first U.S. retail broker-dealer to offer 24/5 trading on select ETFs in 2018.
For wealth advisors and Registered Investment Advisors (RIAs), Schwab's expanded trading hours present both opportunities and considerations. The ability to execute trades outside traditional market hours can be advantageous in responding to global events and news releases that occur overnight. However, it's essential to be mindful of potential risks associated with after-hours trading, such as lower liquidity and increased volatility, which can lead to wider bid-ask spreads and challenges in order execution.
Advisors should evaluate whether extended-hours trading aligns with their clients' investment strategies and risk tolerance. It's also crucial to educate clients about the unique dynamics of after-hours markets, including the possibility of significant price movements due to limited participation. Implementing limit orders, rather than market orders, during these sessions can help manage execution prices more effectively.
Schwab's thinkorswim platform facilitates access to 24/5 trading by allowing users to select the EXTO (Extended Hours Overnight) order type for eligible securities. This feature enables advisors to manage trades during extended hours efficiently.
In summary, while Schwab's expansion of 24-hour trading offers increased flexibility, wealth advisors and RIAs should carefully consider the implications for their practice and clients. Balancing the benefits of extended access with the inherent risks of after-hours trading is essential to ensure prudent investment management.
