Regular trading on the New York Stock Exchange and the Nasdaq electronic market ends at 4 p.m. EST. That's when the markets post "closing" prices, with the last trade of the day, for newspaper and other market tables and for mutual funds to calculate net asset values. Trading begins at 9:30 a.m. Monday through Friday, except for nine holidays. Markets close at 1 p.m. on the day before three holidays, July Fourth, Thanksgiving and Christmas.
The NYSE and Nasdaq have extended afternoon hours from 4 p.m. to 8 p.m. On half-day market holidays, extended hours run from 1 p.m. to 5 p.m. No extended or after-hours trading takes place on market holidays. Both markets also have pre-opening hours, from 4 a.m. to 9:30 a.m. for the NYSE and from 7 a.m. to 9:30 a.m. for Nasdaq.
Private electronic communications networks, not governed by the NYSE or Nasdaq, also offer "after hours" trading, matching buy and sell orders electronically. These are operated by companies such as Instinet or brokerage firms. Orders still are placed through brokers but are confined to "limit" orders, which set a specific buy or sell price. Other types of orders are deferred to regular trading hours.
After-hours trading began with professional and institutional investors who used electronic communications to buy and sell stocks anonymously. This trading became available to individual investors in the 1990s, and now any investor can participate through a broker with an ECN link. However, some brokers restrict after-hours trades to the same periods as NYSE's Arca and Nasdaq networks.
The Securities and Exchange Commission warns that after-hours trading may not let a broker or investor see a full range of price quotes because most brokers subscribe to only one network. This may result in greater price spreads, more volatility in prices and reduced chances of a stock trading at a specified price. Much after-hours trading is "news driven" as institutions and major investors react to news after regular trading ceases.
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