Trading for Night Owls

Historically, the New York Stock Exchange and the NASDAQ have closed trading at 4:00 p.m. each weekday. However, this will soon be changing now that several companies --- mostly online brokerages --- are offering their customers extended trading hours. NASDAQ is in the midst of transition to after-hours trading and the NYSE has plans to change during 2000.

  • Is it really new?

    The answer is no. Many companies, like Reuter's Instinet, have been providing ways to trade before and after the markets are open for a long time, but access was typically limited to large, institutional investors. More recently, new electronic venues, electronic communications networks (ECN's), have been launched. ECN's target individual investors interested in trading stocks. Some of the companies who currently offer after-hours trading include Charles Schwab, E* TRADE, Discover Brokerage, Datek Online and Dreyfus Brokerage.

  • What types of trades are allowed?

    Many ECN's only allow customers to enter limit orders --- orders to buy or sell at a specific price. That way if the trade can't be made at that price, the order goes unfilled. This is due to the wide price swings associated with lower trading volumes. ECN's that have high trading volumes, because of institutional investors, will allow market orders --- orders that are processed at the prevailing market price, whatever it is.

    Most ECN's only trade NASDAQ stocks currently, but there are a handful of companies that trade NYSE stocks.

  • What does this mean for the "closing price of the day"?

    That is the question everyone is trying to figure out. Currently, not everyone is in agreement about what the closing price of the day should be. The closing price of a stock used to be easy to figure out…investors simply waited until after the markets closed. But now with extended hour trading gaining popularity, a stock's quoted closing price varies based upon the source. However, most newspapers publish the "benchmark" last price, which is the last trade executed during regular trading hours.

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