After-hours trading

Trading outside of a stock exchange's opening hours.

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.


How does after-hours trading work?

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.


Why would you trade after-hours?

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 trading

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.

More terms

Stock Market

A place where shares of publicly listed companies are traded.
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Coupon

Also called a dividend, this is the fixed annual interest paid to gilt holders. It’s usually paid in two equal, semi-annual instalments and expressed as a percentage of the nominal value of the gilt.
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Quick ratio

Learn what quick ratio stands for in financial terms and how to calculate it.
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Time Value of Money

The concept that money you have now is more valuable than the same sum in the future.
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DMO

The United Kingdom Debt Management Office. It’s an executive agency responsible for managing the government’s debt and cash needs, primarily through issuing gilts and Treasury bills.
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Packaged Retail and Insurance-based Investment Product (PRIIP)

An investment where, regardless of its legal form, the amount repayable to the retail investor is subject to fluctuations.
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Spot Rate

The currency exchange rate a bank quotes, valid with immediate effect.
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Ponzi Scheme

A form of fraud designed to lure new investors, and pays the earlier backers by using the new investors' money.
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Value Investing

The art of buying shares which trade below their value, according to the analysis of the value investor.
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