The Corner

Stock trading has gone on nearly 24 hours a day on dozens of different exchanges on different continents in different time zones for decades. What’s changed in the past 15 years is the extent to which those markets are linked. Another reason is the growing number of multinational companies that trade on worldwide exchanges. Another is the increased use of electronic trading in worldwide markets.

Even more important to 24-hour trading is that many domestic exchanges have consolidated rapidly over the past 10 years, especially here in United States. For instance, the Pacific Stock Exchange, which was a regional stock exchange with its main floor operation located in San Francisco and a secondary branch in Los Angeles, was purchased by ArcaEx. Then in 2006, ArcaEx was merged with the New York Stock Exchange (NYSE). This created NYSE Group and ArcaEX eventually became known as NYSE Arca.

According to NYSE Arca it operates under the following times.

Pre-opening session: 3:30 a.m. ET

Opening session: 4 to 9:30 a.m. ET

• 4 a.m. ET  — opening auction

• 9:28 to 9:30 a.m. ET — market order freeze period

• 9:30 a.m. ET — market order auction

Core trading session: 9:30 a.m. to 4 p.m. ET

• 3:58 to 4 p.m. ET — closing auction freeze

•4 p.m. ET — closing auction run and closing price disseminated.

Extended hours: 4 to 8 p.m. ET

• 8 p.m. ET — limit orders entered after 4 p.m. ET are canceled.

Another important reason for trading around the clock is because international exchanges have consolidated. In 2007, NYSE Group merged with Euronext, forming NYSE Euronext. Euronext was a multi-European stock and derivative exchange operator.

After NYSE and Euronext merged the new company “brought together major marketplaces across Europe and the U.S. whose histories stretch back more than four centuries. The combination was by far the largest of its kind and the first to create a truly global marketplace group.”

While not to scale, as the NYSE Euronext combination, other domestic and international consolidations and mergers have occurred with a number of exchanges in different countries, including the U.S.

Finally, as the trading ends in one city, activity shifts to a city in a later time zone, sweeping the changes in prices around the world. The opening prices in Tokyo or Sydney are influenced by the closing prices in the U.S. — just as Asia’s closing prices affects what happens in Europe and what happens in Europe influences U.S. markets.

The global market partly explains why a stock can end trading in the U.S. at one price and open the next day at a different price. There’s not an hour of the day when no trading is going on somewhere in the world. However, that does not mean that every security (stock or bond) is traded in every market that is open. Many markets, both international and domestic, only trade certain types of securities. So liquidity, the ability to buy or sell a security, is dependent on the global markets that are willing to trade that security at any given time.

Quote of the week: “God Almighty hates a quitter.” — General Samuel Fessenden, 1896

Bart Ward is the chief executive officer of Ward & Co. Ltd. an Anoka-based registered investment adviser – specializing in the management of stock and bond portfolios in companies which are listed on the NYSE.

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