Trading during extended-hours may pose greater risks than the risks you take when you trade during standard market hours. You should review and understand these risks prior to engaging in extended-hours trading.
Liquidity. Liquidity is the level of trading activity and the volume of investments available for trading. In general, the greater the liquidity of an investment, the greater the chance an order to buy or sell will be executed successfully. You may see reduced liquidity during extended-hours trading sessions that prevents your orders from being executed, in whole or in part, or you may experience a less favorable price than you might receive during standard market hours.
Price volatility and price spreads. Price volatility refers to the speed and size of changes in the price of a security. There may be more volatility in premarket and after-hours hours trading than in the standard market session, which may prevent your order from being executed, in whole or in part, or you may experience a less favorable price than you might receive during standard market hours. Price spread is the difference in prices between what you can buy a security for and what you can sell it for. Lower liquidity and higher volatility in extended-hours sessions may cause greater spreads for a particular security than that same security might experience during normal trading hours.
Access to other markets and market information. Not all market centers are connected in extended-hours trading sessions, and not all market centers offer extended-hours trading during the same time periods. This means it’s possible that there’s greater liquidity in a particular security or a more favorable price in that security in another market center. Access to quotes and trading information in other market centers may be limited during extended-hours sessions. Additionally, other participants in the extended-hours sessions may be placing orders based on news or other market developments outside the standard market hours, and this may affect the price of securities in extended-hours trading. Keep in mind that news stories and related announcements, coupled with lower liquidity and higher volatility, may cause an exaggerated and unsustainable effect on the price of a security. Before you place an order during an extended-hours trading sessions, you need to decide whether you have enough current information to determine a limit order.
Price variance from standard market hours. Orders you place in the extended-hours markets are available at prices generally based on the supply and demand created by other sellers and buyers participating in the extended-hours sessions. Therefore, execution prices in the extended hours sessions may not necessarily match pricing available in the standard daytime trading session. You might pay more, or receive less than you would compared to trades in standard market hours. You will not, however, receive an execution price that is worse than your established limit order for the extended-hours sessions.
Time and price priority of orders. Orders in the extended-hours sessions are generally handled in a price/time priority manner. Orders are first prioritized according to price, with the orders at the same price ranked based on the order entry time. There is no Reg NMS trade through protection during the extended-hours sessions, so price/time priority is set by each market center, not across market centers. This may prevent your order from being executed, in whole or in part, or prevent you from receiving as favorable a price as you might receive during standard market hours. If you change your order, your change is treated as a cancellation and replacement, which may cause it to lose its time priority.
Communication Delays. If there is a high volume of orders, increased number of communications being sent, or other computer system problems, you may experience delays or failures in communication that cause delays in or prevent access to current information about the investments you’re considering, or in executing your order.
Trading Options Securities. Risk of Lack of Calculation or Dissemination of Underlying Index Value or Intraday Indicative Value (“IIV”) and Lack of Regular Trading in Securities Underlying Indexes. For certain products, an updated underlying index or portfolio value or IIV will not be calculated or publicly disseminated during Extended Trading Hours. Since the underlying index or portfolio value and IIV are not calculated or widely disseminated during Extended Trading Hours, an investor who is unable to calculate implied values for certain products during Extended Trading Hours may be at a disadvantage to market professionals. Additionally, securities underlying the indexes or portfolios will not be regularly trading as they are during Regular Trading Hours, or may not be trading at all. This may cause prices during Extended Trading Hours to not reflect the prices of those securities when they open for trading.
