Pre-Market and After-Hours Trading on the NYSE and the Nasdaq

What Is Pre-Market and After-Hours Trading?

The stock market, or technically speaking, the U.S. stock market exchanges—particularly the New York Stock Exchange (NYSE) and the Nasdaq—are, typically, open between 9:30 a.m. and 4 p.m. Eastern Time (ET). However, with the adoption of new technology and increased demand for trading, these hours have been extended to include what is known as pre-market and after-hours trading.

Some of the most important market moves can take place outside the NYSE and Nasdaq's regular trading sessions.

Key Takeaways

  • The rise of electronic trading networks and a desire to be competitive caused the major U.S. stock exchanges to allow trading before and after the regular market hours of 9:30 a.m. to 4 p.m. ET in the early 1990s.
  • Pre-market trading typically occurs between 8 a.m. and 9:30 a.m., though it can begin as early as 4 a.m. ET.
  • After-hours trading starts at 4 p.m. and can run as late as 8 p.m. ET.
  • Known collectively as extended trading hours, the pre-market and after-hours sessions carry several risks: illiquidity, price volatility, and low volume/lack of participants.
  • Pre-market and after-hours trading takes place exclusively through electronic communication networks (ECNs).

Where to Find Off-Hours Market Data

The first place investors should look to find information about pre-market and after-hours activity is their brokerage account's data service if they have one. Brokerage information services often provide the most detailed off-hours market trading data, and they usually come free with a brokerage account. Investors will often be able to not only trade within this time period but also see the current bid and ask prices for specific securities and the change in prices compared to a previous period's close.

If you don't have a brokerage account or your broker doesn't provide this service, there are several free sites that give users access to pre-market and after-hours data. The Nasdaq website offers comprehensive quotes on shares listed on the Nasdaq, showing every trade—including the price, time, and size of trades made in off-hours trading.

For pre-market trading information, use the pre-market quotes service, and for after-hours information, use the after-hours quotes service. Although the NYSE's website does not offer such a detailed service in terms of depth of information, the quoting service on its site shows you the last movements of the stocks during the off-hours market.

Other services, such as Yahoo Finance, will show the last trade made in the pre-market and after-hours markets. These services will usually cover all stocks, whether they trade on the NYSE, Nasdaq, or another exchange.

Pre-market and after-hours trading are also known collectively as extended trading.

The Pre-Market Hours

The pre-market is a period of trading activity that occurs before the regular market opens. Though its trading session typically occurs between 8 a.m. and 9:30 a.m. ET each trading day, several direct-access brokers allow access to pre-market trading to commence as early as 4 a.m.

However, very little activity occurs for most stocks so early in the morning, unless there is news. The liquidity is also extremely thin, with most stocks only showing stub quotes. So although pre-market trading allows for an early jump on reactions to news—especially events that occur in Europe or the U.K.—the limited amount of volume can furnish a deceptive perception of a stock's strength or weakness. In fact, trading during these hours can be quite risky due to the possible slippage from exceptionally wide bid-ask spreads.

Most early birds wait to begin pre-market access at 8 a.m. Pre-market trading can only be executed with limit orders through electronic communication networks (ECNs), such as NYSE Arca, Instinet, and Bloomberg Tradebook.

The After-Market Hours

The New York Stock Exchange introduced after-market trading in June 1991 by extending trading hours by an hour. The move was a response to increased competition from international exchanges in London and Tokyo and private exchanges, which offered more hours of trading.

Today, after-hours trading starts at 4 p.m. ET and can run as late as 8 p.m., although volume typically thins out much earlier in the session; the majority is done by 6:30 p.m. As in the pre-market hours, trading in the after-hours is conducted through ECNs.

After-hours trading is something traders or investors can do if news breaks after the close of a stock exchange. The changes in share prices during the after-hours are a valuable barometer of the market reaction to the new information released. However, after-hours price changes are more volatile than regular-hours prices: As with the pre-market, illiquidity and lack of volume can pose a problem. Institutional investors or certain major investors may choose simply not to participate in after-hours trading, regardless of the news or the event. As a result, it is quite possible for a stock to fall sharply in the after-hours only to rise when the regular trading session resumes the next day.

Pros and Cons of Pre- and Off-Hours Trading

Pros
  • Pre-market and after-hours trading is convenient for working professionals or others who are busy during regular trading hours because it gives them the opportunity to trade after-hours.

  • It enables traders to trade based on news items, such as earnings, that occur after regular trading hours.

  • Pre-market and after-hours trading enables traders to move ahead of others by placing orders ahead of the next day's schedule.

Cons
  • Pre-market and after-hours trading is characterized by illiquidity or very low levels of liquidity, meaning there is no guarantee that a certain trade will be executed.

  • Pre-market and after-hours trading is volatile and can result in price swings because there are few participants.

  • Not all stocks are available to trade during pre-market and after-hours trading.

  • Only limit order types are available for trading during pre-market and after-hours trading.

What Are the Times for Pre-Market and After-Hours Trading?

The bulk of pre-market trading usually occurs from 8 a.m. to 9:30 a.m., though it can start as early as 4 a.m. E.T. After-hours trading begins at 4 p.m. and can go until 8 p.m. E.T.

How Is Pre-Market and After-Hours Trading Conducted?

Pre-market and after-hours trading is conducted using electronic communications networks (ECNs) that directly connect buyers and sellers.

What Are the Pros and Cons of Pre-Market and After-Hours Trading?

Though they enable traders to react to news items that occur outside of regular trading hours, pre-market and after-hours trading carries several risks, such as illiquidity, price volatility, and low volume of trading due to lack of participants.

The Bottom Line

Pre-market and after-hours trading is conducted outside of regular trading hours through ECNs that match buyers with sellers. Though they enable traders to react to news items that occur outside of regular trading hours, pre-market and after-hours trading carries several risks, such as illiquidity and price volatility. Such trading also enables traders to trade based on news items, such as earnings, that occur after regular trading hours.

Article Sources

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  1. Nasdaq. "After-Hours." Accessed Jan. 12, 2022.

  2. Nasdaq. "Pre-Market." Accessed Jan. 12, 2022.

  3. NYSE. "The New York Stock Exchange." Accessed Jan. 12, 2022.

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