After-Hours Trading

Business, Legal & Accounting Glossary

Definition: After-Hours Trading




What is the dictionary definition of After-Hours Trading?

Dictionary Definition


After-Hours trading also called AHT refers to trades made after the traditional trading hours on the NASDAQ and NYSE exchanges.


Full Definition of After-Hours Trading


After-hours trading is stock trading which takes place after the traditional 4:00 p.m. close of the New York markets. While after-hours trading has been available to institutional investors for quite some time, after-hours trading is now permissible for all traders. After-hours trading is conducted via an Electronic Communication Network (an ECN), which electronically matches buyers and sellers rather than by open call, which is still the primary method of order fulfillment during normal trading hours. While the after-hours trading volume is generally very light, there are advantages to after-hours trading, especially for institutional investors. By using the ECN for after-hours trading, traders can avoid the spreads charged by market makers, plus with after-hours trading there is greater anonymity, an important consideration for many large traders.

The majority of all stock trades made in the US occur between 9:30 am and 4:00 pm Eastern Standard Time. However, trades can be made after the exchanges are closed if one can find a market maker willingly to accommodate them.

Historically only high net worth individuals and institutions participated in AHT, however now with the invention of Electronic Communications Networks (ECN) retail investors have unprecedented access to AHT.

AHT can be risky, as there is typically greater volatility and significantly less liquidity available due to a dearth of buyers and sellers. Additionally, there may be fewer quotes available to individual traders if their ECN doesn’t communicate with other ECNs. Accordingly, investors who participate in AHT may wish to consider utilizing limit orders to minimize their risk of getting an unfavorable price due to a wide bid-ask spread.


Synonyms For After-Hours Trading


AHT

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Definition Sources


Definitions for After-Hours Trading are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 4th August, 2021 | 3 Views.