After Hours Trading & The Instinet

What is all this I hear about the "Instinet" and "after hours trading"? I keep reading about companies whose stock dropped or rose in after hours trading due to some news that came out after the market closed. Who can trade when the market is closed and how?

Does it sound like there is a party going on and you weren't invited? Well, there is -- but don't feel bad. Individual investors aren't invited to this party. It is only the "big guys" like mutual funds and pension funds who are trading after hours on the Instinet.

The Instinet is a huge global system of trading that operates by matching up institutional orders. Thus institutions that can find a buyer or a seller can trade among themselves without going through an exchange. The fees associated with this are pretty high, and it is not possible for individual investors to participate. The Instinet is owned by Reuter's plc and is a private company. The Nasdaq also runs a similar service called Selectnet.

We have heard that some discount brokerages are working on a system that would allow individual investors to trade among themselves after hours over the internet--but it isn't ready yet as far as we know.

There is another way to trade stocks "after hours." Some U.S. stocks are listed on exchanges all over the world and trade on those exchanges during our off hours. If you have a brokerage account on a foreign exchange you could trade after hours that way.

But before you get all excited and start trying to figure out how to open an account in Singapore, be aware that the fees to trade in other countries are higher than our discount brokerages offer. That, plus the fact that you have to constantly be aware of exchange rates or you will see your trading profits wiped out by a move in the currency market, makes the whole world wide trading thing something that even many professionals steer clear of. So far.