What is a Delayed Opening?

Malcolm Tatum

Delayed openings are short-lived periods when the opening of a trading day is postponed. A delayed opening may last for only a matter of minutes or go on for several hours. Generally, there are some sort of extenuating circumstances that make it prudent to delay the trading for a short period of time.

Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

While there are a number of situations that could conceivably lead to a delayed opening, there are three common reasons for authorizing a temporary postponement at the beginning of the trading day. First, a delay in the opening of the exchange to active trading may be due to a need to restore some degree of balance to a market that closed with a great disparity between supply and demand the previous trading day. When this is the case, it gives the exchange a chance to determine if the factors that caused the disparity the previous day have subsided or at least lessened. The idea behind the delayed opening is to assess the situation and be prepared to respond accordingly once the exchange is opened for trading.

Another common reason for a delayed opening has to do with crucial announcements that have the potential to create a great deal of confusion on the market floor. Delaying the opening provides investors with more time to fully assess the announcement in question and determine what impact, if any, will be felt with their current holdings. This is often the case when a major corporation makes an announcement of a major change in product lines or major officers of the company, or in the announcement of a merger. Doing so provides investors with a little more time to digest the announcement and minimize the chance of making rash decisions on purchases and sales.

Stock exchanges may choose to issue a delayed opening due to world events that are likely to make a major impact on the trading activity for the day. Events such as natural disasters, military coups, and the results of political elections may be so profound that one or more major markets is anticipated be significantly impacted. As in the case of 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 in regard to trades that day.

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While a delayed opening is often viewed as an inconvenience, the fact is that the judicious use of a delayed opening is in the best interests of not only the exchange in question, but also the investors who trade on the exchange. By providing a little extra time for all parties concerned to weigh current circumstances before beginning to trade, the chances of making uninformed decisions about trades is minimized and thus carries less potential to undermine the marketplace.

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