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Extended Hours Trading - Risks
• Risk of Lower Liquidity. Liquidity refers to the ability of market
participants to buy and sell securities. Generally, the more orders that
are available in a market, the greater the liquidity. Liquidity is
important because with greater liquidity it is easier for investors to
buy or sell securities, and as a result, investors are more likely to
pay or receive a competitive price for securities purchased or sold.
There may be lower liquidity in extended hours trading as compared to
regular market hours. As a result, your order may only be partially
executed, or not at all.
• Risk of Higher Volatility. Volatility refers to the changes in
price that securities undergo when trading. Generally, the higher the
volatility of a security, the greater its price swings. There may be
greater volatility in extended hours trading than in regular market
hours. As a result, your order may only be partially executed, or not at
all, or you may receive an inferior price in extended hours trading than
you would during regular market hours.
• Risk of Changing Prices. The prices of securities traded in
extended hours trading may not reflect the prices either at the end of
regular market hours, or upon the opening the next morning. As a result,
you may receive an inferior price in extended hours trading than you
would during regular market hours.
• Risk of Unlinked Markets. Depending on the extended hours trading
system or the time of day, the prices displayed on a particular extended
hours trading system may not reflect the prices in other concurrently
operating extended hours trading systems dealing in the same securities.
Accordingly, you may receive an inferior price in one extended hours
trading system than you would in another extended hours trading system.
• Risk of News Announcements. Normally, issuers make news
announcements that may affect the price of their securities after
regular market hours. Similarly, important financial information is
frequently announced outside of regular market hours. In extended hours
trading, these announcements may occur during trading, and if combined
with lower liquidity and higher volatility, may cause an exaggerated and
unsustainable effect on the price of a security.
• Risk of Wider Spreads. The spread refers to the difference in price
between what you can buy a security for and what you can sell it for.
Lower liquidity and higher volatility in extended hours trading may
result in wider than normal spreads for a particular security
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