Stock Market Trading on the NYSE takes place each Monday through Friday between 9:30 and 16:00 Eastern Standard Time. NASDAQ trading also takes place at the same time; however, trading in certain stocks is possible even when official trading has ended. The advantage provided by the trading sequence is that it enables an investor to respond to announcements published by companies after trading hours. At such times, however, trading volume is light, which exposes stock prices to sharp fluctuations.
Sequential trading in Stock Market has five special features:
Two-sided trading – Trading takes place between anonymous buyers and sellers.
- Simultaneous trading – A transaction takes place whenever there is an encounter between a buyer and a seller. A large number of shares can be traded simultaneously.
- Sequential trading – Investors can place orders throughout the entire trading day and are also able to respond immediately to events occurring after trading hours. Each transaction is negotiated separately, and the price for the next transaction may be different.
- Shares per order – Orders can be placed for any number of shares, but they are usually in multiples of 100. Investors can place orders for other amounts, called odd lots, but they must also pay a higher commission to the broker who performs the transaction.
- Price fluctuation limits – Price fluctuation is unrestricted.
The following is an example of sequential trading:
General Motors (GM) was last traded at $19.60 At 10:30, Susan places an order to sell 100 shares of GM at $19.60. The order is registered in the stock exchange order book.
If there aren’t any investors who placed an order to sell GM at $19.60 prior to Susan’s order (i.e. Susan’s order is the first one in the order book at that price), any demand for GM at $19.60 will meet Susan’s order, resulting in a transaction for GM at that price.
A transaction will also take place when the demand for GM is at any price higher than $19.60, but the transaction will be posted at $19.60 and the buyer will pay that price for the shares.