Pre-Market Trading Activity Observations

Nov. 27, 2019 12:35 PM ETAAPL, QMI1 Comment
Ivan Struk profile picture
Ivan Struk
16 Followers

Summary

  • Access to brokers with ECN's supportive of extended hours trading has increased, contributing to more overall non-intraday trading.
  • Extended hours trading is becoming as important in asset pricing as intraday trading to the price discovery.
  • Pre-market trading contributed to 46% of Apple Inc. price action YoY.

If you’re active in the markets you’re probably used to reading the morning news (or your favorite SA Contributor) as you prepare for the 9:30 opening bell. You check where the Dow closed yesterday, check the pre-market price, and think about the upcoming reporting period for your own or your clients’ holdings. The notions of “pre-market” and “after-hours” trading are foreign to you. Sure, everyone knows about the market’s two phantom sessions, but “nobody trades that” you tell your clients. Afterall, you were taught that those sessions are reserved for the big boys of downtown Manhattan. Still, more and more of the people that surround you have been telling you to get in on extended hours trading. You scratch your head, staring idly at the bronze charging bull paperweight on your desk, thinking you have to be missing something.

Proliferation of ECNs

The reality is that extended-hours trading, holistically referred to as pre-market trading, is more accessible than ever, and it’s becoming noticeably significant. Long gone are the days of only paying attention to the intraday session occurring between 9:30 and 16:00 EST.

Pre-market trading used to be available to very few investors, usually only the large institutional players managing hundreds of millions in assets, exchanging large blocks of shares with equally as large participants. Now anybody can trade in the pre-market. Stock exchanges, asset managers, and banks, all rely on electronic communication networks (ECN) that make it possible to transfer information and instructions quickly between participants, and over the past decade access has become increasingly easier and cheaper. Retail/discount brokers now offer access to extended trading hours at smaller costs, Robinhood added some pre-market functionality to their free trading platform last year, and platforms like Morpher offers full pre-market trading access with no fees.

Moreover, banks and institutions are trading

This article was written by

Ivan Struk profile picture
16 Followers
Engaged in researching investment opportunities across the Central-Eastern European (CEE) markets including the Balkan peninsula, and taking a contrarian look at emerging markets investing. Founder of East Mill Capital Research Group.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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