What is 'Batch Trading'

Batch trading refers to an accumulation of orders that are executed simultaneously. Batch trading saves time and effort by treating multiple buy and sell orders as one large transaction. In the U.S. batch trading is only allowed at the market open and pertains solely to orders placed during non-market hours.

BREAKING DOWN 'Batch Trading'

Batch trading is a concept that is used only once per day in the U.S. market to process orders that have accumulated during non-market hours. During all other regular U.S. market trading hours continuous trading is used.

Generally speaking, batch trades are typically used on high-volume stocks that have accumulated orders during non-trading hours. To qualify for an opening market batch trade, a security’s order price must be matched with an appropriate market counterpart at the time of the market’s open. This constrains most batch trades to include market orders however it can also include any limit or stop orders accepted at the market price. Since market orders have no specified price they typically encompass the largest percentage of an opening market’s batch trades. Limit orders with specified prices set by buyers and stop orders with specified prices set by sellers can also be included if their order prices match the opening market price.

Continuous Trading

Batch trading is restricted to the market open in the U.S. so as to ensure that the stock's price is fair and just, not fluctuating wildly from one batch trade to the next. During the regular hours of a market exchange, the exchange will use continuous trading. Continuous trading is a function of standard exchange processes which are facilitated through market makers who match buyers and sellers and then execute transactions immediately at an ask price.

Continuous trading is a primary component of the market that keeps securities efficiently priced. In continuous trading, securities are priced through a bid/ask process that is facilitated by a market maker. Market makers are responsible for matching buyers and sellers in daily trading. They can be either individuals working for an exchange or technology systems devised by the exchange.

In continuous trading a market maker seeks to match buyers and sellers using bid and ask prices. Ask prices are the market’s quoted prices for a security. A market maker profits from the bid/ask spread which provides compensation for the service of executing a trade. In a market exchange the market maker bids for a security at a low price, buying the security for the investor. They then sell the security to the investor at the ask price generating a profit through the process of matching the buyer and seller in the secondary market.

RELATED TERMS
  1. Overnight Trading

    Overnight trading refers to trades that are placed after an exchange’s ...
  2. Batch Credit Card Processing

    The transmission of all credit card transactions on a given day ...
  3. Buy Limit Order

    A buy limit order is an order to purchase a security at or below ...
  4. Matching Orders

    Matching orders is the process by which a securities exchange ...
  5. Opening Cross

    Opening cross is a method used by Nasdaq to determine the opening ...
  6. Away From The Market

    Away from the market means the bid on a limit order is lower ...
Related Articles
  1. Investing

    The Basics of Trading a Stock: Know Your Orders

    Taking control of your portfolio means knowing what orders to use when buying or selling stocks.
  2. Investing

    Narrow Your Range With Stop-Limit Orders

    With stop-limit orders, buyers protect themselves from prices too high for their tastes.
  3. Trading

    An Introduction To Securities Markets

    The global securities market is constantly evolving. Discover the most popular market structures currently in use.
RELATED FAQS
  1. What exactly is being done when shares are bought and sold?

    Most stocks are traded on physical or virtual exchanges. The New York Stock Exchange (NYSE), for example, is a physical exchange ... Read Answer >>
  2. Why are the bid and ask quotes usually so far away from each other in after-hours ...

    The low volumes typically traded through after-hours trading systems can create wide bid-ask spreads. Read Answer >>
  3. When is a buy limit order executed?

    Understand how buy limit orders work, and factors such as the bid-ask spread and market volatility that traders must consider ... Read Answer >>
Trading Center