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📘 Trade Type Explanation: Extended Hours Sold Out of Sequence

What is it?

Extended Hours Sold Out of Sequence refers to a trade that occurs outside regular market hours and is reported in an order that doesn't match the actual sequence of execution.

When does it occur?

This trade type occurs during pre-market or after-hours trading sessions when trades are executed but reported to the tape out of chronological order.

Key characteristics:

  • Happens during extended trading hours (pre-market or after-hours)
  • Trades are reported in a different order than they were executed
  • May affect the apparent price movement of a stock

Impact on trading data:

  • High/Low: May temporarily affect intraday high and low prices for extended hours, but typically corrected once sequence is resolved
  • Open/Close: Generally does not affect official open or close prices, as these are determined during regular market hours
  • Volume: Included in total volume calculations for the extended trading session
  • Price: Can create short-term discrepancies in time and sales data, potentially showing irregular price movements
  • VWAP (Volume Weighted Average Price): May temporarily impact intraday VWAP calculations for extended hours until the correct sequence is established
  • Last Trade: The most recently reported trade may not be the most recently executed trade, potentially misleading if not properly understood

Why it matters:

Understanding this trade type helps retail traders interpret extended hours price movements more accurately and avoid misinterpreting apparent price jumps or drops. It's crucial for accurately assessing stock performance and making informed trading decisions during extended hours.

Accessibility and restrictions:

  • Retail investors: Can encounter these trades when analyzing extended hours data
  • Institutional investors: More likely to be involved in extended hours trading
  • Restrictions: None specific, but extended hours trading generally has lower liquidity
  • Broker-specific considerations: Availability of extended hours trading may vary by broker

Example:

Three trades occur after hours: Trade A at 4:01 PM for $50.00, Trade B at 4:02 PM for $50.05, and Trade C at 4:03 PM for $50.10. They are reported as: C, A, B. This out-of-sequence reporting can make the price appear to drop and then rise, when it actually rose steadily.

Technical details:

  • SIP Mapping: May have specific codes to denote out-of-sequence trades in extended hours
  • Reporting requirements: Trades must still be reported, even if not in perfect sequence

Related trade types:

  • Form T: Another type of extended hours trade
  • Regular extended hours trades: Reported in the correct sequence

Common misconceptions:

Some traders might mistake out-of-sequence trades for rapid price fluctuations, leading to incorrect assumptions about stock volatility or direction.

Historical context:

This trade type became more common with the rise of electronic trading and extended trading hours, which increased the complexity of trade reporting.

Regulatory considerations:

While out-of-sequence reporting is allowed, exchanges and regulators still require timely and accurate reporting of all trades, including those executed during extended hours.

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