What is late trading?
Late trading concerns the practice of trading in the fund after the market has closed on the day. This practice is illegal in the United States. In this way, an investor involved in such a practice will receive an advantage over investors who buy shares in the fund without knowing what the final price will be. The practice of late trading also allows the investor to prosper on the basis of foreign markets and use late reports. This type of trading was the core of the 2003 mutual fund scandal, in which many of the largest companies in the US faced prosecution for behavior. Late trading in mutual funds is one of the practice that puts a normal investor in a serious disadvantage and results in uneven conditions. By obtaining prices for mutual funds that no one else can, institutes, who deal with this practice, can make profits with virtually no risk.
Mutual Fund is a fund in which funds are connected from multiple investors who then participate in the losses and profits of the fund. The fund is managed by the company of the mutual fund that invests capital in the fund among many different securities. Mutual funds are assessed on the market according to their net value of assets, which is the measurement of the performance of all securities contained in the fund.
When a merchant legally buys a share in a mutual fund, he will not know the price of these shares until the end of trading, which comes in the US at 4:00 am. Eastern Standard Time (EST). If mutual fund companies allow late trading by preferred investors, these investors basically know the net value of the assets they want to invest in. This information can be used in Concert with foreign markets that open and close and close before the American market and often respond to its movement due to differences in the time zone. In addition, this type of illegal trading allows the investor to use sudden messages, toTeré could affect a specific market sector.
Late trading practice is doubly harmful to investors of mutual funds who act in accordance with investment laws. Given that the price of the fund will be influenced by the actions of late traders, investors working legally basically pay for profits illegally acquired by others. Given that investors who adhere to laws are already at a competitive disadvantage by not interested in final prices, it is understandable why such outrage in the US was raised when the US was exposed in 2003 that late business practices were extended.