This post is about an enhancement that probably is of interest only to those who pay really close attention to how the close of trading takes place, but I think it’s a positive change and worth noting if only for that subset of our audience.
And at bottom there’s a shout-out to Abraham Lincoln and Joseph Searles, so some of you might want to skip down to that.
NYSE and NYSE Amex have simplified and streamlined the process of how securities close when there’s an imbalance (more orders to buy than sell or vice versa). Here’s the memo if you need the details, and here is the bloggish summary, paraphrasing from the original:
Previously, when there was no imbalance at the close, there was a single closing transaction, also called a “closing print.” In that print, all of the buy and sell Market on Close orders and marketable Limit on Close orders were paired off at the price of the previous sale on the exchange.
But when there was an imbalance, there were two closing prints. The first closing print included all of the shares constituting the imbalance — that is, those that were not paired off. The price was the offer (in the case of a buy imbalance) or the bid (in case of a sell imbalance). The second closing print went off at the same price and included all of the paired-off MOC and marketable LOC orders.
The reason for doing two prints for closing imbalances was to create transparency. That first closing print told market participants the size of the closing imbalance. But having two prints also meant additional manual processing by the Designated Market Maker, and ran counter to our goal of keeping the close timely and efficient.
Enter a solution that provides more transparency and efficiency. Our NYSE Imbalance Datafeed and NYSE Amex Imbalance Datafeed now provide real-time data about order imbalances. The feeds start at 3:40 p.m. and update every 15 seconds from 3:40-3:50 p.m., and every 5 seconds thereafter until 4 p.m.
That stream of data provides more sunlight than the extra closing print did, and eliminates the additional manual processing. As a result, as of 6 Feb., we moved to single-print closes for imbalance situations.
As the memo puts it: “The consolidation of the prints…will reduce the amount of manual information to be reported by the [Designated Market Maker], thus increasing the speed and efficiency of the closing process, ultimately improving the quality of both markets with timelier reporting of closing transactions.” The memo also includes a specific example of the change, which you might want to check out if I’ve simplified it too much.
BTW, you might have also noticed that the former American Stock Exchange is referred to above as NYSE Amex. That’s the new name, replacing the too-long NYSE Alternext U.S.
• • •
Hey, on the occasion of Abraham Lincoln’s 200th birthday, how’s this for a fitting historic event that occurred on this day 39 years ago?
Today in NYSE History (NYSE.com)
12 Feb. 1970 — Joseph L. Searles III became the first black member of the NYSE.
