6/11/2022 - Economy and Finance

Is it possible to operate pre and after market in the USA?

By gustavo neffa

Is it possible to operate pre and after market in the USA?

Most American scholarships operate from 9:30 am to 4 pm Eastern U.S., which today has a one-hour difference in relation to Buenos Aires (arrancan at 10:30 local time).

For an investor it is possible to buy actions before and after these times, which are the regular hours of operation. This is due to the fact that many companies present relevant information before and after the formal opening of the markets and many investors want to participate in this important moment in which much relevant information is spread.

Very bad news is often spread waiting to close the markets on Friday, because that day at 4 pm is no longer even after market. But from Monday to Thursday, investors can operate any action after 4 pm if the broker is allowed.

The so-called “pre-market” is open between 8 am and 9:30 am, and the so-called “after-market” operates between 4 pm and 6:30 pm (is the case of Nasdaq and NYSE at least). It is a market where investors are more sophisticated and with greater access to information.

Enabled times depend on brokers

TDAmeritrade (AMTD), for example, allows investors to operate in the premarket between 8 am and 9:15 am. Fidelity in return, allows to do it since the 7 am. Vanguard does not allow to operate at this time.

The systems that operate in the after market are not the bags themselves, but are the Electronic Communication Networks (ECNs). Instinet was the first ECN, which was initially used to trade between different institutions. Other ECNs appeared as Archipelago to facilitate trading outside regular hours. But as they work independently and not connected with each other, the networks can offer, inform and operate very different prices among themselves.

By regulation, sensitive information such as the presentation of a corporate result, the announcement of an extraordinary dividend, the purchase of a company by another, or of all that is interpreted as “relevant information” for investors should be spread outside the normal trading schedule.

Attention!

In those previous and later hours liquidity can be much lower than the normal wheel, and a spread between the purchase price and higher selling, making it difficult to operate.

In addition, relevant information is spread and produces abrupt changes in prices, whether predictable (the announcement of a corporate result) or sorpressive (any other unprogrammed event). If markets are efficient, then the price should reflect at the time all the information that is revealed to investors. It should also reflect on the following day when opening the formal market, if a company spread in the after market or in the pre market this information. But the lack of liquidity prevents full price variations, or the uncertainty of the moment generates effects that may even be contrary.

In addition, price variations from one day to the other can be important when in the after market can move the price in a direction before the diffusion of a corporate result, but in the opposite direction if, on the next day, opposite signals are sent in the corresponding conference call, whenever it is done in the pre-market.

Often, investors who do not operate automatically, but who do so with orders written by e-mail for example or who attend orders by phone may not find anyone on the other side when they want to operate.

Another important theme is that the broker or bank that operates the customer account may not enable its customers to operate. In some cases, it is necessary to request the possibility (by default, restricting unless you request it) and in other cases directly are prohibited (by own decision).

Is it possible to operate 24 hours?

The markets for futures, where raw materials, Treasuries, shareholders' indices and currencies operate, have continuous wheels in the same bag on working days. No actions. But an even more professional and ambitious investor can operate actions like Petrochina or Alibaba 24 hours: it is due to which they are listed in different markets around the world and with accounts opened in these markets can follow 24 hours during working days to operate (until Friday at 4 pm).

In the after market and in the premarket, many opportunities can be detected, and the most vexed investors can operate with newcomers in the market that, as we all know, are operated with people who take time to process and digest the information. My recommendation is that you do it only if you. He's a professional investor because of the risk he takes.

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gustavo neffa

gustavo neffa

I'm Gustavo Neffa. Director of Economics and Finance at FinGurú. Partner and director of Research for Traders, leading a team of market analysts. I spent the last 24 years in the financial sector in both domestic and foreign entities, having occupied the post of Senior Research Analyst in Macrosecurities of the Banco Macro and the BBVA Banco Francés, as well as economic analysts with the economist in chief of the BBVA Banco Francés. I am also a professor in Corporate Finance, Investment Portfolio Management, Financial Asset Valuation, Valuation of International Investment and Finance Projects in various MBAs and postgraduate courses in Buenos Aires and in the interior of the country and professor of the MBA of the UNLP and the UNNE of Financial Asset Assessment and the postgraduate degree in the UBA Capital Market in agreement with ByMA. Co-director of the UNLP Advanced Finance Programme.

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