Electronic trading that occurs after the close of the formal trading session. Trading after these formal hours was previously an extravagance, accessible only by high net-worth investors and institutional investors. But that changed by the turn of the new century. It was the introduction of electronic communication networks (ECNs) that has enabled everyday individual investors to participate in after-hours, or extended hours, trading. Sometimes, after-hours trading refers to trading a listed security over the counter (i.e. not through organized exchanges) after the regular trading hours of the main exchanges.

However, unlisted securities may also be traded after regular trading sessions. In terms of liquidity, after-hours trading is inferior to formal trading because market makers are obliged to interfere on both sides during formal trading hours not thereafter, and therefore a large portion of buying and selling transactions is confined to that window of trading. Transacting in after-hours marketplace, particularly reflected in activity magnitude and prices, may positively or negatively impact security prices on the next trading day.

The periods in which exchanges are open for business vary from one exchange to another, and from one country to another. For example, the New York Stock Exchange and the Nasdaq Stock Market have their normal trading hours fixed between 9:30 a.m. and 4:00 p.m. Eastern Time. In Japan, the Tokyo Stock Exchange opens for business at 9:00 a.m. and closes at 3:00 p.m. (local time).

Although after-hours trading may present considerable opportunities for investors, it potentially exposes participants to a variety of risks in terms of price volatility, lack of liquidity, uncertain prices, etc. (For more on the risks associated with after-hours trading, see the tutorial: “After-Hours Trading Risks”.