> What would happen if equity markets were only open a very short period a day?
I think about it like this:
How stable are prices of low liquidity instruments compared to the most liquid instruments?
What happens in the first 10-15 mins after the markets open? EXTREME volatility.
Longer trading sessions, higher volume and more liquidity lowers volatility on average.
A hypothetical X percent worse spread on my mortgage bonds, means I have to borrow X% more to buy the house. That’s meaningful money for most people.
Market makers will still earn the spread. More trading just means it gets lowered because of competition and volume.
I think about it like this:
How stable are prices of low liquidity instruments compared to the most liquid instruments?
What happens in the first 10-15 mins after the markets open? EXTREME volatility.
Longer trading sessions, higher volume and more liquidity lowers volatility on average.
A hypothetical X percent worse spread on my mortgage bonds, means I have to borrow X% more to buy the house. That’s meaningful money for most people.
Market makers will still earn the spread. More trading just means it gets lowered because of competition and volume.