Late-Day Trading


DEFINITION of 'Late-Day Trading'

An unethical (if not illegal) practice of a hedge fund purchasing and then selling securities (usually shares of a mutual fund) after the close of a trading day, but making the transactions appear as though they occurred before the market close.

BREAKING DOWN 'Late-Day Trading'

For mutual funds, net asset value is (NAV) determined at 4pm EST (the market close), and it does not change until the market opens again. Hedge funds involved in late-day trading work out a special relationship with a mutual fund that, usually for higher-than-average fees/commissions, allows the hedge fund to buy and sell mutual fund shares after hours but record the trade at 4pm. This practice gives the hedge fund an opportunity to profit when material information affecting the fund is released after the market close. In such cases, because it is stagnant, the NAV may not represent the actual asset value, which won't materialize until the market opens again - at which time late-day traders sell their shares at a profit.

  1. Hedge Fund

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  2. Market Timing

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  3. Open

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  4. Net Asset Value - NAV

    A mutual fund's price per share or exchange-traded fund's (ETF) ...
  5. Close

    The end of a trading session in financial markets. "Close" refers ...
  6. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
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  1. What is late-day trading? Why is it any different from buying and selling stocks ...

    Late-day trading is the illegal buying and selling of mutual funds after regular market hours. This practice is wrongful ... Read Full Answer >>
  2. What is a mutual fund's NAV?

    Net asset value (NAV) represents a fund's per share market value. This is the price at which investors buy ("bid price") ... Read Full Answer >>
  3. Why are mutual funds subject to market risk?

    Like all securities, mutual funds are subject to market, or systematic, risk. This is because there is no way to predict ... Read Full Answer >>
  4. Does Fidelity have mutual funds?

    Fidelity offers clients all asset classes of mutual funds, ranging from domestic equity to specialized sectors. The offering ... Read Full Answer >>
  5. How often are mutual fund prices updated?

    A mutual fund's price, or its net asset value (NAV), is determined once a day after the markets close at 4 p.m. Eastern time ... Read Full Answer >>
  6. Can minors invest in mutual funds?

    A mutual fund can be opened under the name of a minor through a custodial account overseen by a guardian. The custodian holds ... Read Full Answer >>

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