Late Trading

Late trading is the illegal practice of placing orders to buy or sell mutual fund shares after the market has closed but still receiving the same-day price. Mutual funds are typically priced once a day based on the net asset value (NAV) calculated after the market closes. Late trading allows traders to capitalize on post-market information, such as earnings reports, which gives them an unfair advantage over other investors who must wait until the next trading day.

Example

A hedge fund places an order to buy shares in a mutual fund after the market closes, but the order is executed at the same day's closing NAV, benefiting from information released after the close.