Quick ratio
Learn what quick ratio stands for in financial terms and how to calculate it.
Most investors will trade the stock market when stock exchanges are open.
In the UK, the London Stock Exchange is open from 08:00 until 16:30 and that’s when most big banks and retail investors will be buying and selling shares.
But some people do trade the market outside of these hours. This is usually referred to as after-hours trading.
A stock exchange connects buyers and sellers, enabling investors to purchase or dispose of the stocks or ETFs that they hold.
After-hours trading operates in the same way, it’s just that it’s usually done outside of an exchange. Instead, traders use companies that operate other exchange-like systems.
In the US, these are usually referred to as electronic communication networks (ECNs) or alternative trading systems (ATS). Regulatory requirements mean that, across most of Europe, they are known as multilateral trading facilities (MTFs).
All of these things are effectively names for systems that match buy and sell orders. In simple terms, they act as virtual marketplaces for people that want to buy and sell stocks - much like an exchange does.
The main reason to trade after-hours is if there is something that could affect a company’s stock price that doesn’t take place within regular trading hours.
Let’s say some news came out that an oil company experienced a totally unexpected problem and wouldn’t be able to produce any oil for three months. That would almost certainly drive down its stock price.
But if that happened outside of regular trading hours, investors might go to a company offering after-hours trading and try to sell their stocks in that company as quickly as possible.
Accessing after-hours markets is something that not all brokers offer. It will usually cost more than regular trading too.
That’s because accessing the different trading systems requires different technology and the involvement of more third-party companies.
Pricing in the markets themselves will also be affected because there are fewer companies and individuals trading outside of regular trading hours. This makes it harder for market makers to price the stocks they deal in, which in turn widens the spread they offer to traders.
