Monday, April 18, 2011

After Hours

Did you know that the NYSE conducts a pre-opening auction at 4 am?  And that on the four largest US exchanges (the third and fourth are BATS and DirectEdge) the trading day is basically 8 am to 8 pm?  The reason for bringing this up is that a student on our real time system executed a trade after hours at a price different from the 4 pm close, and asked about why this may be the case.  On FTS, you can trade outside “normal” market hours at whatever quotes are available at that time (unless an instructor requests otherwise). 
We believe allowing such trade has serious advantages.  These stem from two sources. 
First, as we all know, news frequently comes out after 4 pm and before 9:30 am.   Economic indicators that are released at 8:30 am include the weekly jobless claims, the monthly GDP report, PPI and CPI, durable goods, retail sales, and so on.   Earnings announcements are almost always made before or after normal trading hours.  So having to wait until the next day to execute a trade, besides being unrealistic, can be a serious disadvantage.  Second, it prevents reaction to news in other countries.  For example, in out popular Global Equities trading case, you manage a portfolio of stocks in Asia, Europe, and the US.  Of course, different markets are open at different times, but since we allow 24 hour trading, it allows you to reposition your portfolio without having to wait, whether you are reacting to company specific events or global events. Let us know what you think. 

No comments:

Post a Comment