“But it’s a question of getting the wheels turning before the market opens so that the flow comes back to us during the day. “The pre-market is a bit of a mug’s game,” said one equities banker, on condition of anonymity. However, the company warned after market open that gross margins were being hit by intense competition, which sent its shares down 30 percent in record volumes.īehind some of the hedge funds and traders willing to take bigger risks in the pre-market are the brokers and banks willing to facilitate their trades - and potentially lose money.īig banks have since the financial crisis become jumpier about incurring losses and about using their balance sheet for trading but some London-based bankers admitted the pre-market was a source of business with valuable clients and that they were open to wading into riskier waters to secure commissions. retailer Kate Spade & Co’s shares rose more than 6 percent in heavy pre-market trading last Tuesday after it released earnings. Pre-market trading can often spike on results: U.S. “I do think that it may be indicative of a certain amount of positioning by institutions.And there is more pre-market liquidity and trading in NYSE big caps than there was even a few years ago.” “Even though this volume has grown, it’s still so small,” said Stanley Dash, VP at TradeStation. Volumes are still well below their 2007 peaks. broker TradeStation shows that pre-market trading as a proportion of the regular day’s trading volume has risen slightly over the past few years, though it is still only 0.4 percent on average of overall volumes of the NYSE and 0.7 percent for the NASDAQ. Our strategies allow us to use a blend of pre-market and regular trading but it tends to be driven by the client’s appetite for risk.”ĭata from U.S. “However, it also carries more risk, with spreads being larger and volume and liquidity being less than regular market hours. “It is understandable that trading in the pre-market is seen as offering more opportunity and more chance to gain an edge based on information or data rather than speed,” said Jasvir Biriah, managing partner at hedge fund London-based Premaeus Investments. Other hedge-fund investors echoed the view that the pre-market was a valuable hunting ground for strategies driven by data and research. Asia is the least developed in terms of electronic trading and investors rely more on exchanges, which do not have pre-market sessions for regular shares. and requires an investment bank or market-maker to quote prices.
Pre-market off-exchange trading also exists in Europe but it is much less electronic than in the U.S. While regulators are not investigating pre-market trading specifically, a recent batch of enforcement actions against other opaque trading practices such as the use of dark pools run by big global banks - coupled with incoming rules in Europe that aim to make markets more transparent - have also alerted investors to the risks of trading in the murkier areas of the market.
#Pre market trading how to
Securities and Exchange Commission, which publishes guidelines on how to trade out of regular hours. The risks of pre-market trading have caught the eye of regulators such as the U.S. The chance to analyse data and information without the need for speed is worth the extra risk, according to Sibi. stocks, has for some become a refuge - despite the risk of losses - from high-speed traders that depend on a reliable flow of orders to be cost-effective. You are no longer just prey to high-frequency traders as you usually are. “But in the pre-market, you are in another world.You’re not up against the same people. “Regular trading has become very difficult,” said Sibi, in a telephone interview. Sibi, 37, head of Arbitrage Technology, is one of a limited number of traders focused on the pre-market - a risky, volatile, thinly traded world mostly populated by hedge funds and broker-dealers willing to stomach potentially painful price swings.īut it is a world that also offers the chance of richer pickings than the regular trading day, which is seen to be dominated by high-speed electronic traders who can outrun slower rivals and where long-term volatility is low, limiting profits. shares, albeit with some restrictions, before the official opening of the New York Stock Exchange and the NASDAQ at 9.30 a.m., the program uses a combination of news and market analysis to work out which shares to buy before selling them at the open. Scouring multiple trading venues that offer U.S. Traders work on the floor of the New York Stock Exchange August 19, 2014.
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