After-Hours Trading

Definition After-hours trading refers to the purchase and sale of publicly traded stocks after the major stock markets, such as the New York Stock Exchange, Nasdaq Stock Market and American Stock Exchange, close at 4 p.m. Eastern time. A slew of alternative private markets, called electronic communications networks, have emerged to accommodate after-hours stock trading. They are generally open until 8 p.m. Eastern time during the business week, but some stay open 24 hours a day.

By Lee Copeland

March 27, 2000 12:00 PM ET

Computerworld - The New York Stock Exchange Inc. (NYSE), Nasdaq Stock Market Inc. and American Stock Exchange Inc. (AMEX) are the indisputable leaders of the U.S. stock market.

ECNs: Fragmented Markets

To increase liquidity in the after-hours markets, many of the major ECNs have agreed to share quotations.

By sharing bids to buy and sell issues, the nine existing ECNs hope to create enough volume to attract large institutional investors and compete more effectively as one virtual market, say analysts.

"If the ECNs all connect, then you'll have fragmented pools of liquidity that search each other for trades," explains Jaime Punishill, an analyst at Forrester Research. "At the end of the day, it's still a big pile of liquidity, and as far as the market is concerned, it does not matter whether it's made up of several networks or not."

Until volume develops in the after-hours market, some analysts plan to avoid it altogether.

"For the individual investor, it's difficult to get a decent trade on a timely basis in after-hours," says analyst Steve Shepich at Olde Discount Corp. in Detroit.

It's almost impossible to gauge the fair price for an issue after the market closes, according to Shepich.

"When a company misses its numbers by 10 cents, what is the fair price based on that new information?" says Shepich. "The stock will move based on supply and demand, and that's hard to estimate in the after-hours market."

"The skinny on after-hours trading is that it's the first inning of a long game," says analyst Dan Burke at Gomez Advisors. "The liquidity levels and fragmentation concerns need to be worked out before there is wide-scale user acceptance."

But while these three markets attract the bulk of buyers and sellers, they miss out on some trades because they close promptly at 4 p.m. Eastern time Monday through Friday. Demand to execute stock trades may continue after the major markets close and into the wee hours of the morning. To meet this demand, a number of electronic communications networks (ECN) that accommodate after-hours trading have sprung up.

There are nine ECNs, including New York-based Instinet Corp., The Island ECN Inc. and MarketXT Inc., which serve as private alternative stock markets for institutional investors and brokerages. Individuals can't purchase stock directly through an ECN; purchases must be made through traditional stock brokers that partner with ECNs. Most ECNs take trades in the early morning for before-hours trading, until 8 p.m. Eastern time, and a few offer trades 24 hours a day.

Recommend Digg Twitter ShareThis

Email Print Send Feedback Reprints

Additional Resources

Xerox

Win a color printer!

By using solid ink technology only from Xerox, you could save up to 65% by printing color for the cost of black and white. Enter for a chance to WIN a PhaserTM 8860 network color printer!

Microsoft

Upgrade to Internet Explorer 8 today.

Save time and mitigate security risk. Deploy it now.

Sybase

NEXT-GENERATION MOBILITY PLATFORMS

In this white paper, IDC analyzes the role of next-generation mobile enterprise platforms as organizations seek a more strategic deployment of mobile solutions.

Learn the important issues you must consider before starting your next mobility initiative. Get your mobility white paper from IDC now, compliments of Sybase.

White Papers & Webcasts

Accelerate SSL Encrypted Applications
The amount of SSL traffic is growing in the enterprise. Because it is encrypted, it cannot be properly controlled and accelerated. Blue Coat...

Usability Is Everything
Learn what sets Workday's HR and Payroll solutions apart from the competition....

ESG Lab Field Audit
Many companies have successfully implemented Riverbed WAN optimization solutions within their Cisco networks. This ESG Lab Field Audit document explores the success that...

The Value of Real SaaS at Workday
Cost savings, speed to value, and innovation brought to the enterprise by Workday's software-as-a-service solutions for HR and Payroll....

Shape Your Apps Strategy to Reflect New SaaS Licensing and Pricing Trends
Why are smart companies choosing software-as-a-service? Find out in the complimentary Forrester Research report...

SaaS at Flextronics, Inc.
Dave Smoley, CIO of Flextronics, discusses the real value of software-as-a-service and why he chose Workday for his HR solution....

Natural User Interface for Enterprise Applications
Learn how a revolutionary user interface can make a complex enterprise application so intuitive even casual users can jump right in....

Why Compliance Pays
This OnDemand webcast explores the relationship that firms with best compliance records have higher revenue, greater customer retention, lower financial losses from data...

A Truly Global HCM System
Learn about a system built with advanced object-oriented technology that support multi-national requirements and costs less to implement, maintain and upgrade....

Agile Enterprise Content Management (ECM) for Rapid ROI
Find out how combining ECM and BPM will help adress issues about content rich business processes....

All White Papers | All Webcasts