What’s a delayed opening?

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Late openings are short-lived periods when the opening of a trading day is delayed. A delayed opening can last for just a few minutes or continue for several hours. There is usually some sort of extenuating circumstance that makes it prudent to postpone trading for a short period of time.

While there are many situations that could lead to a delayed opening, there are three common reasons for authorizing a temporary delay at the beginning of the trading day. First, a delay in opening the exchange for active trading may be due to the need to restore some degree of equilibrium in a market that closed with a large disparity between supply and demand the previous day. When this is the case, the exchange can determine whether the factors that caused the disparity on the previous day have narrowed or at least narrowed. The idea behind the delayed opening is to assess the situation and be prepared to respond accordingly as the exchange opens for trading.

Another common reason for a late opening has to do with crucial announcements that have the potential to create a lot of confusion in the market. Delaying the opening gives investors more time to fully evaluate the announcement in question and determine what impact, if any, will be felt with their current holdings. This is usually the case when a large company makes an announcement of a major change in product lines or key executives of the company or an announcement of a merger. This gives investors a little more time to digest the announcement and minimizes the chance of making hasty buying and selling decisions.

Stock exchanges may choose to issue a delayed open due to world events that are likely to have a major impact on the day’s trading activity. Events such as natural disasters, military coups and the results of political elections can be so profound that one or more major markets are predicted to be significantly impacted. As with announcements about corporate changes, the opening of the exchange may be delayed as a means of allowing investors to explore the impact of the event in more detail before jumping to conclusions and possibly making unwise decisions regarding trading that day.

While a delayed opening is often seen as an inconvenience, the fact is that the judicious use of a delayed opening is in the interest of not only the exchange in question, but also the investors who trade on the exchange. By providing a little extra time for all stakeholders to assess the current circumstances before starting to trade, the chances of making uninformed business decisions are minimized and therefore have less potential to hurt the market.

Asset Smart.

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