WASHINGTON, D.C.—Director of Securities Policy Benjamin Schiffrin issued the following statement in connection with the approval by the Securities and Exchange Commission (SEC) of an application filed by 24X National Exchange LLC (24X) to register as a national securities exchange and operate a trading platform 23 hours per day, five days per week:

“The SEC’s approval of 24X’s application to trade 23 hours a day, five days a week, when liquidity is low and pricing is poor, will harm investors and damage markets. Overnight trading will only make the problems that already exist in our fragmented securities markets worse and introduce new risks for retail investors. Retail investors trading during an overnight session will be trading in a market where there are few buyers and sellers, and where prices will be more volatile and less favorable than during normal hours. This means that, during overnight sessions, retail investors will only get the best prices in a bad market, thereby losing money if they had traded during normal business hours.

“The SEC claims that investors will be protected because 24X’s rules require its members to disclose the risks of overnight trading. Disclosure, however, is not protection as research has shown for a very long time that disclosures do not adequately warn investors who consistently do not act on such warnings. That is presumably because such so-called disclosure warnings are typically buried in very small print buried in overly long disclosure documents. That is not investor protection; it’s broker protection from investors who needlessly lose money.

“Another risk of overnight trading is the fact that it is human nature to engage in riskier behaviors at night. Financial firms will have an incentive to send retail investors push notifications and other prompts at a time when they might be particularly susceptible to trading inducements. And retail investors will be able to trade in the middle of the night simply by pushing a button on their phone app. As we’ve seen with legalized sports betting, the combination of technology fueled by artificial intelligence that entices fans to bet, the ease with which they may bet, and the ability to place bets 24 hours a day has led to a gambling addiction crisis. As we said in our comment letter, it is easy to envision the financial industry using the same combination of inducements to trade and the ability to trade at any time of the day to get retail investors hooked on trading, with potentially serious consequences.

“One saving grace is that 24X will not be able to commence its overnight trading session without providing further assurances that it can satisfy its obligations under the Securities Exchange Act of 1934. This will require another filing with the SEC. The SEC should take that opportunity to more carefully review 24-hour trading before giving final approval and allowing overnight exchange trading to commence.”