1

I live in Germany and I am trading stocks for around 6 months. My favorite stocks so far are mainly the big tech companies that we all know (Alphabet, Amazon) as well as the according indices (e.g. Nasdaq 100).

Due to the time lag between Europe and the US, I can trade for around 6.5 hours until the NYSE opens at 9.30 am. And when the NYSE opens, I often see a strong movement in stock prices. To me it seems that the price for a certain financial instrument being generated in Europe during the day, is not adopted by the US but more or less negated.

Do you know if this has more a technical reason or is it the sheer dominance of the US market?

  • 2
    This seems kind of vague and Too Broad. "[A] certain financial instrument being generated in Europe during the day". Just the one? It could be something specific to that instrument. But we can't suggest things, as we don't know what financial instrument it is. – Brythan Feb 3 '18 at 12:51
  • It seems quite clear to me. Let’s for example take Apple closing at 500, then - while the US sleeps - it works its way up to 505 in European exchanges, with many trades and normal volumes, and when the US starts trading again, they start at 500, as if nothing happened. The European markets are treated like kid’s play that ‘doesn’t count’ for the ‘real market’. This applies to many shares. – Aganju Feb 3 '18 at 14:19
  • 1
    @Aganju why should the DAX consider trades on DAX stocks outside of it's trading window? It shouldn't. – RonJohn Feb 3 '18 at 20:51
  • It shouldn’t. The point is that US trades start as if the stock never traded over night. I would expect them to be starting at a higher value too. – Aganju Feb 3 '18 at 20:52
1

In general the primary and most liquid markets (usually the same) dictate the companies overall price movements. Also of consideration is, what indexes the stock is part of, and how those indexes are trading. You may find that the price of Apple Inc. more closely follows the movement of the S&P 500 Index than how it moves in Europe earlier on in the day.

There is a catch-22 situation where people don't want to trade in illiquid markets because there is not enough liquidity.. which in turn results in there not being liquidity.

While alternative listings (either through multiple listings of the common stock or listing of depository receipts for the common stock) may be helpful for market participants who do not want to go through the hassle of using foreign currencies or finding brokers who have access to those markets, large institutions will care more about which markets have adequate liquidity, and are open when they want to trade. They will often disregard price movements that take place when there is low levels of liquidity as having a lower level of liquidity can result in non-representative price movements resulting from short term lack of supply or demand.

Some chart analysts 'weight' the indications on a chart by volume.

While the primary session opens at 9:30 New York time, US exchanges do also have 'pre-opening' and 'after hours' sessions that coincide with European hours (e.g. NYSE Arca opens at 2:00 AM New York time). Often movements that occur during the pre-opening session are disregarded when the market opens in its primary session due to the low volume of trading that took place.

People who would have been willing to buy at the lower price (or sold at the higher price) hadn't arrived at the office yet...

0

Cross listing is when a company trades in multiple exchanges. Ideally price movement in one exchange should impact the other instantaneously. But my guess is that too much complexity due to factors including different currencies (their fluctuations), different time zones, legal complexities, may render a sync impossible. However I strongly think any trade hoping to capitalize on disparity between markets will be prevented as well. Someone more informed on this topic should be able to explain.

0

Although the stocks are for the same company they are effectively different products traded on different markets. Of course their prices are correlated but there is no reason for them to be identical. The respective prices are affected by local supply and demand dynamics and exchange rates.

If you are part of a financial institution that has the necessary infrastructure to efficiently trade on both markets you can profit from these differences in a form of arbitrage.

Many brokers will let you trade directly on the US exchange if you prefer to do so, you must then take the relevant time zone into account.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.