NYSE Floor Brokers operate on an agency basis on behalf of institutional investors and broker-dealers, including market participants representing retail investor interest. Traditionally, Floor Brokers at the NYSE had substantial discretion and flexibility when representing customer orders manually on the trading floor. Today, NYSE blends modern electronic trading with human judgment and assessment, and provides electronic tools that enhance the ability of Floor Brokers to perform their traditional agency function in today’s fast-paced markets.
One of those tools is the "D Order," which is short for Discretionary Order. D Orders use technology to replicate the Floor Broker’s traditional manual role to exercise discretion at what price he or she is willing to buy or sell in reaction to contra-side orders, both in continuous trading and in auctions. Because D Orders permit Floor Brokers to interact with contra-side orders at a range of prices, they offer additional flexibility over Market on Close orders (MOCs) and Limit on Close orders (LOCs) residing in the electronic order book.
While D Orders are available for use throughout the trading day, most executions occur in the closing auction, where they’re known as Closing D Orders. At 3:55 p.m., Closing D Order interest eligible to participate in the closing auction is added to the order imbalance feed at their discretionary price range. Closing D Orders can also be submitted, modified or cancelled up to 3:59:50 p.m. These distinct features of Closing D Orders are designed to facilitate the Floor Broker’s traditional agency role on behalf of larger institutional interest, allowing Floor Brokers to work in conjunction with their customer to find larger liquidity opportunities.
There are no restrictions on which side of the market Closing D Orders may be entered, and, along with other order types or market events, a Closing D Order can "flip" the imbalance for a closing auction from one direction to another. This dynamic interaction allows liquidity to build upon itself and creates opportunities for substantial size to trade in the closing auction.
The NYSE Trading Floor plays an important role in the closing auction, and interest represented via the floor currently contributes more than one-third of total Closing Auction volume (see chart). At the same time, total volume in the close has grown to more than 6% of NYSE-listed volume, larger than any other auction and most other trading venues. The NYSE Trading Floor, and tools such as Closing D Orders, help investors maximize the benefits of the NYSE closing auction, the largest single liquidity event in an increasingly fragmented market.