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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