Extended Hours Trading Risk Disclosure
Extended Hours Trading refers to Pre-Market Trading session and After Hours Trading sessions that occur outside the standard trading session – 9:30 a.m. ET to 4:00 p.m. ET.
In accordance with FINRA and NASDAQ Rules, Aegis Capital Corp is required to disclose the common risks associated with trading in extended sessions that you should be aware of:
- 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 release 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.
- Risk of Partial Executions. Orders placed during extended trading hours may be entered through a participating ECN or exchange, which may be linked to other ECNs or exchanges. Because you cannot add qualifiers to an order, such as AON or FOK, a round lot order may be filled in part by an odd lot or mixed lot order, leaving stock left over to buy or to sell. There is a risk that the remaining order may not be filled during the extended-hours session. An odd lot may not be represented in the displayed quote. This would occur in instances in which an order has an execution leaving an odd lot. There are no execution guaranties for an odd lot or the odd lot portion of a mixed lot portion of an order.
- Risk of Lack of Calculation or Dissemination of Underlying Index Value or Intraday Indicative Value (“IIV”). For certain Derivative Securities Products, an updated underlying index value or IIV may not be calculated or publicly disseminated in extended trading hours. Since the underlying index value and IIV are not calculated or widely disseminated during the Opening and Late Trading Sessions, an investor who is unable to calculate implied values for certain Derivative Securities Products in those sessions may be at a disadvantage to market professionals.
FINRA Rule 5320 Disclosures
FINRA Rule 5320 generally prohibits a broker-dealer that accepts and holds an order in an equity security from its customer or a customer of another broker-dealer without immediately executing the order from trading that security on the same side of the market for its own account at a price that would satisfy the customer order, unless it immediately thereafter executes the customer order up to the size and at the same or better price at which it traded for its own account.
Institutional Accounts and Large Orders. With respect to the orders of an “institutional account,” as defined in NASD Rule 3110, or for orders of 10,000 shares or more (unless such orders are less than $100,000 in value), Rule 5320 permits a broker-dealer to, and Aegis Capital Corp may, trade an equity security on the same side of the market for its own account at a price that would satisfy such customer order provided that certain notice is provided to the customer and the customer is provided a meaningful opportunity to opt in to the Rule 5320 protections with respect to all or any portion of its order.
Institutional accounts and persons placing orders for 10,000 shares or more not otherwise subject to the protections afforded by Rule 5320 may “opt in” to the Rule 5320 protections by providing written notice (i) with respect to any particular order, at the time of placing an order to the Aegis Capital Corp Registered Representative taking your order, and (ii) with respect to all orders for your account, to Aegis Capital Corp, Attn: Chief Compliance Officer, 810 7th Avenue, 18th Floor, New York, New York, 10019.
Market Making Activities. Aegis Capital Corp engages in market maker activity in various equity securities. With respect to NMS stocks, as defined in Rule 600 of SEC Regulation NMS, Aegis Capital Corp generally sends orders for NMS stocks to other market centers on an agency basis. Aegis Capital Corp has developed and implemented internal controls, including information barriers, that operate to prevent its market making desk from obtaining knowledge of customer orders not routed to it and, accordingly, our market making desk may trade for our own account prior to completion of your order and at the same or a better price than you receive.
“Not Held” Orders. When you place an order with us and leave the price and time of execution to our discretion (a “not held order”), we may trade in the security for our own account prior to completion of your order and at the same or a better price than you receive.
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