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What time of day should you trade International ETFs?

May 16, 2012 - 1 comment

For Canadian investors, caution should be exercised when trading international ETFs. Asian and Australian markets are not open during our trading hours, which results in an incomplete price discovery mechanism for a significant portion of stocks held by the ETF.

So what is an investor to do?

The best option would be to trade during the open market hours where the majority of international stock exchanges overlap the U.S. stock exchange.

In the table below, I’ve illustrated the overlap in market hours for a number of global stock exchanges (shaded in dark grey). Using the Vanguard International Stock Market ETF (VXUS) and the Vanguard FTSE All-World ex-US ETF (VEU) as examples, you can see that approximately 55% of the country stock exchanges represented in the ETFs overlap the U.S. exchange between 9:30 am and 11:30 am (ET).

World Stock Market Trading Hours: 9:30 AM – 4:00 PM (ET)

Sources: World Federation of Exchanges, Vanguard Group as of March 31, 2012


Although not a perfect solution, the following “rules of thumb” could be considered for Canadian investors transacting in International ETFs:

Rules of Thumb

  1. Avoid the first half hour of the U.S. market open – allow price discovery to occur.
  2. Avoid the last half hour of the European market close – there may be fewer traders during this time.
  3. Place your trades between 10:00 am and 11:00 am ET – thereby avoiding the first half hour of the U.S. market open and the last half hour before most European markets close.

 

By: Justin Bender with 1 comments.
Filed under: Strategy
Comments
  07/05/2016 11:49:05 AM
John Davies
Your graph is informative, but it is hard to read.

Here is a page that lists the trading hours (in EST of New York and Toronto) of the 75+ stock exchanges registered with the World Federation of Exchanges

http://www.swingtradesystems.com/world-stock-exchanges.html

The list also includes market cap and number of companies trading on each exchange, along with a link to their official website.

- John
 



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