In the past, stock investors were limited in how and when they could trade. Before the Internet and online trading, brokers served as middlemen in the stock market, accepting and executing trades on behalf of clients. Electronic trading and instant communication now enable individuals to buy and sell stocks from their homes, and after-hours trading allows you to deal stocks around the clock, with a few conditions and restrictions.
The traditional stock exchange served as a place for buyers and sellers of company shares to meet and trade. All exchanges had a physical location -- in the case of the New York Stock Exchange, the lower Manhattan area of New York City. Physical exchanges still exist in New York, London, Paris, Tokyo, Frankfurt, Hong Kong and other major financial centers. Each of these operations has limited trading hours; in the case of the NYSE, the market floor is open for business from 9:30 a.m. to 4 p.m. five days a week. On Saturdays and Sundays as well as federal holidays, the New York Stock Exchange is closed for business.
Weekdays and Weekends
The concept of a five-day business week and two-day weekend on Saturday and Sunday has spread around the world since the early 20th century. Foreign stock markets remain open with hours approximately the same, in local time, as in New York. Thus, the French stock market is open weekdays from 9 a.m. to 5:30 p.m., the Australian market from 10 a.m. to 4 p.m. and the Hong Kong market from 10 a.m. to 4 p.m., with a one-hour halt for lunch. The time difference between North America and Asia allows trading in Australia and Asian markets when it's Sunday evening in the United States. This is the only "weekend" trading available on physical stock exchanges.
After-Hours Trading and ECNs
A system of after-hours trading arose in the 1990s for those who wished to buy and sell stocks outside of regular market hours. Stock traders can now buy and sell stocks on the weekends through electronic communications networks, to which traditional and online brokerages have access. The networks -- such as Instinet and Archipelago -- maintain their own order books of traders who want to buy or sell a particular stock. For after-hours and weekend orders, the network attempts to match buyer, seller, share amount and price; if no counter-party is on the network, some electronic communications networks will go to other networks to fill trades.
Because trading volume on the weekends is much lower, stock prices become more volatile. News events can drive a stock quickly in an unexpected direction; in addition, the "spread" between the buy -- or ask -- price and the sell -- or bid -- price is much greater. For that reason, most individual traders use limit orders, in which they set a specific price at which the trade must be executed. If there is no price match, there is no trade. Placing a "market order" to buy shares at the best available price is risky, with weekend traders facing the strong possibility that their orders fill at an unexpected price.
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