The Nasdaq Stock Market and the New York Stock Exchange are two of the major market centers in the United States. The regular trading hours are from 9:30 am to 4:00 pm Eastern Time. It is customary for the publicly listed companies to report earnings and other significant news either before or after official market hours. The reason behind announcing earnings and news outside of regular trading hours is that it allows all investors a fair chance to hear and digest the news before anyone can trade on it.
However, large institutional investors found a way to beat the system. They started to trade on a new trading venue called Instinent. Instinent was an Electronic Communication Networks (ECNs). Large institutional investors could trade on the news while individual investors remained locked out of the action. This irritated many individual investors because they can see their stocks rise and fall sharply during the after hours trading session.
Along came a pioneering brokerage firm called Datek Online. Datek Online was launched in June 1996 as an online trading firm for the retail investors. Founded by Jeffrey Citron and Peter Stern, the firm quickly grew to become one of the largest online trading firms. Datek developed a proprietary Electronic Communications Network called Island ECN. They opened up after hours stock trading to small individual investors. Anyone can open an account with Datek and have access to Island ECN after hours trading.
ECNs became so popular that after hours trading was no longer limited to large institutional investors. It is open to all. Most stock brokerage firms now support after hour trading. After hours trading begins from 4:00 pm to 8:00 pm Eastern Time and the advantages it offers are:
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