Retail investors drive stock trading sharply ahead of Wall Street’s opening bell
The buying and selling of stocks before the opening bell on Wall Street has increased over the past three years, a sign that investors are extending the traditional trading day by assessing company news in real time.
In 2019, approximately 384 million shares changed hands each day outside of standard business hours of 9:30 a.m. to 4 p.m. in the United States. These transactions are usually conducted on electronic marketplaces, often owned by the largest US stock exchanges, which take place on either side of the main session times.
By 2021, that figure had risen to 694 million, according to the New York Stock Exchange. And while after-hours trading eased in the first quarter of 2022, the average is still 682 million per day, research from the exchange found this week.
Stefanos Bazinas, execution strategist at the NYSE, said after-hours volumes had “soared” largely because of the rapid growth in trading before the opening bell. So-called “pre-market” volumes averaged 62 million three years ago, accounting for around 16% of all after-hours trade, but that figure rose to 265 million last year, or 38% of total.
Some attribute the rise in trading beyond regular Wall Street hours to investors reacting more quickly to corporate earnings releases, which are released either side of the main session because the information is market-sensitive.
“U.S. stocks, especially global tech brands, are hugely popular overseas, and people react to global news and developments in real time during their waking hours,” said Joe Gawronski, managing director of Rosenblatt Securities. .
The growth of retail investors, who have used forums like Reddit to back so-called meme stocks like GameStop, has also been a “driving force” behind after-hours trading, Bazinos wrote. Small deals accounted for 8% of pre-market deals in March 2022, up from 2% in January 2019.
The NYSE findings add to a growing debate in the US over the length of the trading day – with concerns that greater activity outside of business hours, particularly during the European morning, could exacerbate the problem of low trading volumes in the middle of the United States. day, fueling price volatility.
Many retail investors have grown accustomed to using apps to trade whenever they want, encouraged by 24/7 access to cryptocurrency trading, according to Gawronski.
Bermuda-based 24 Exchange asked U.S. regulators in October to launch the first U.S. exchange open around the clock, trading one thousandth of a share. In March, Robinhood, one of the most popular US brokers, extended its hours of operation by four hours to bring it in line with competitors like Schwab and Fidelity.
Yet even though after-hours trading has increased, an average of 12.8 billion shares are traded in US markets every day during regular hours. For now, most of the activity is still focused on the last half hour of the day.