What is the ‘closing Cross’
The cross closure of algorithmic pricing is used to establish the Nasdaq closing price for each security traded on the exchange. This calculation creates the closing price designed to fit as a lot of bids and selling at the end of the trading day. Market to close, limit on close and imbalance only orders only to the cross closure.
Breaking down the closure of the Cross
The cross is close at exactly 4 PM Eastern time each trading day and serves as a discovery mechanism price for all orders placed. Cross closure allows market participants to execute orders, including market and limit orders closed in a fully transparent price that reflects the actual closing of the market. The official Nasdaq closing Price is established for Nasdaq-listed securities on the cross to serve as a benchmark price throughout the industry to calculate mutual Fund net asset value and valuation of the index.
The closure of the cross, like the cross, is open to all securities listed on the Nasdaq, new York stock exchange and NYSE amex and NYSE arca exchanges. In addition to providing market participants effective price discovery and transparency, the cross closure provides the means for addressing the imbalances that arise in critical events, such as the date of expiry of index futures and options, and balancing of the index.
At 3:50 p.m., Nasdaq begins the closing auction and disseminates information about any order imbalance at the close the book through the Indicator of imbalance is the Volume, along with an indicative closing price. At exactly 4 p.m., the closing book and continuous book NASDAQ came together to create the Nasdaq closing cross. The Nasdaq distributes the closing price crosses to the financial industry and immediately news feeds.
Types of orders associated with cross closure
Cross close used a combination of regular daily trading and three types of orders that occur only at the close of trading.
Market on close orders request the purchase or sale of a financial instrument, regardless of the closing price of the market is installed on the end of the day. The flexibility provided by this type of order makes them relatively easy to fit, and they end up going at a price set at the closing cross.
The limit is close, or Loc orders also request to buy or sell securities at the closing price. Unlike orders, MOC orders, loc to set the range of acceptable closing prices at which trade can occur. For example, if the order of Lok buy specifies the maximum limit for the price of $10 per share to ensure fairness and security covers for $9.99, the order will be executed at the price of $9.99.
Imbalance only orders complete the process. These orders function as orders Locke, but, as a rule, are dealers in an effort to provide a sufficient number of matches exist when NOII indicates an imbalance between buyers and sellers on a given security.
Look at the cross closing prices on the Nasdaq set out more detail on how the Nasdaq performs this calculation.