The NYSE Closing Auction remains the largest equity liquidity event, trading on average more than $18bn per day1. We have previously studied Closing Auction liquidity, participation, and price dislocation, and now focus on the price impact of auction order submission. We find that the market absorbs most large orders with little impact to the current stock price, especially on standard (i.e., non-rebalance) trading days.
We assess market impact of auction orders by examining the reference price and auction quantities from the auction imbalance data. Key data elements:
3:55 - 4:00pm NYSE-listed Russell 1000 Stocks Imbalance Change Ratio
3:55 - 4:00PM All Other NYSE-listed Stocks Imbalance Change Ratio
3:55 - 4:00pm NYSE-listed Russell 1000 Stocks Reference Price Change
3:55 - 4:00pm Other NYSE-listed Stocks Reference Price Change
3:55 - 4:00pm NYSE-listed Russell 1000 Stocks
3:55 - 4:00pm Other NYSE-listed Stocks
3:55 - 3:56pm Reference Price Changes
3:56 - 3:57pm Reference Price Changes
3:57 - 3:58pm Reference Price Changes
3:58 - 3:59pm Reference Price Changes
3:59 - 4:00pm Reference Price Changes
Comparing listing market quality across a large number of stocks is best achieved by using a matched sample, using key firm characteristics, such as sector, market cap, price and volume. Our analysis found that NYSE-listed stocks achieve tighter spreads, lower volatility and more accurate open and close auctions than their matched Nasdaq stocks, often by a significant margin.
The eight largest NYSE closing auctions have all occurred since June 2020, driven by growth in index rebalance events. We’ve previously studied the market impact of large auction orders and more recently highlighted the significant additional liquidity opportunities at the close. With significant index rebalances on the horizon, we now focus on volume dynamics in the days before and after large index rebalances, finding additional liquidity available in the market.
To help enable a data-driven, fact-based discussion around price improvement activity, NYSE has published a study quantifying the aggregate price improvement achieved by US equity investors in H1 2022 and analyzing its composition. Our study is based on public TAQ data and evaluates every standard trade in the first two quarters against the prevailing NBBO at that time.