What is late trading?
Late trading refers to when trade is executed after the standard local national exchanges have closed. Considered illegal and unethical, late trading should not be confused with after-hours trading, which is considered a legal practice.
Where have you heard about late trading?
Late trading played a part in the 2003 mutual funds scandal, in which Bank of America was charged for allowing Canary Capital Partners LLC to purchase mutual fund shares after markets had closed. Canary Capital Partners were also charged.
What you need to know about late trading.
In terms of mutual funds, late trading involves placing orders for shares after the stock market has already closed. By doing this, the investor gets that day's closing price, as opposed to the next day's opening price, but makes the transaction look like they secured the trade before the trading day closed. Under SEC rules, this activity is considered illegal in the USA since it gives the hedge fund an unfair opportunity to profit and defrauds innocent investors. The trading day closes at 4.00pm EST.
Find out more about late trading.
Understand the difference between late trading and after-hours trading by reading our definition of after-hours trading.