The NYSE closing auction is the busiest time in the US equity market trading day. On average, nearly 300 million shares, or just over 8% of total NYSE-listed volume, are executed in the NYSE closing auction. As the only open outcry trading floor for equities, NYSE combines sophisticated technology and human judgment for the smooth functioning of this auction.
One way to access the Closing Auction’s liquidity is through an order type that replicates a Floor Broker’s manual interaction by including discretionary pricing instructions. This order type is currently known as the “d-Quote”, and as the NYSE migrates NYSE-listed trading to the Pillar technology platform in August 2019, it will become known as the “D Order”. For participation in the closing auction, its function will remain the same; it can be used intraday, or a Floor broker can designate that the discretionary pricing instructions will be active only for the closing auction, which will be known as a “Closing D Order”. Closing D Orders provide additional flexibility for auction interaction.
Below is an overview of the Closing Auction order types and functionality, highlighting the use of Closing D Orders.
1Order types are shown using forthcoming Pillar order type names
On average, Closing D Orders have accounted for approximately 35% of total NYSE Closing Auction volume. We see lower share for these orders on event days such as rebalances and month-ends, due to the huge influx of MOC & LOC orders on these days. This indicates that a very high share of volume on these days is trading on the close due to an event, meaning that there are additional opportunities for traders to discover outsized liquidity on these days (see related post on this topic).
Beginning at 3:50 p.m., NYSE publicly disseminates closing auction order imbalance information, providing information about the level of buyers and sellers in a particular security. At 3:55 p.m., the NYSE includes Closing D Orders in the closing auction order imbalance information. The imbalance data currently updates as frequently as every 5 seconds; when NYSE completes its migration to Pillar the frequency will increase to as much as every 1 second.
Key data points include:
|Imbalance Side||Buy/sell direction of imbalance shares|
|Reference Price||Used to calculate Continuous Book Clearing Price (generally last sale)|
|Paired Quantity||Number of shares matched at the Continuous Book Clearing Price|
|Continuous Book Clearing Price||Price where all better-priced orders on the side of the imbalance could be traded|
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