Nasdaq’s price discovery mechanism that crosses buy and sell orders at a single price at the end of the regular market session.
Here is how Wikipedia describes Open Cross: “Even though trading stops at 4pm on the Nasdaq, the business world does not. Companies often wait until after the stock market closes for the day to announce various news items, such as corporate earnings, mergers, acquisitions, staff reductions and changes in key personnel. Similarly, geopolitical events, natural disasters and other market-moving developments can take place any time of the day or night.
“Corporate news and other developments generate information that often causes investors to change their sentiment toward companies, sectors or segments of the financial markets. Good news makes investors want to own various stocks and drives prices higher, and bad news has the exact opposite effect. In turn, the investors place orders to buy and sell after the market has closed for the day and before it opens for business in the morning. This creates a need for the Nasdaq to factor the news and resulting demand to buy and sell into the prices of the securities when the stock market reopens for business. Accordingly, the prior day’s closing prices are not the same as the next day’s opening prices.”
Prices for the opening cross are determined through an auction process, with buyers and sellers placing offers and counteroffers until prices match, resulting in a trade. The objective of the opening cross process is to achieve maximum execution by getting the greatest number of shares of a given security to trade at a single price. The process is not as simple as it sounds.
The Opening Cross is a process that generates a single opening price reflective of the true supply and demand of a particular stock as the market opens each day. The Opening Cross improves upon the current market open and resolves natural stock buy and sell imbalances at the open.
From 9:28 a.m. to 9:30 a.m. (the two minutes prior to the Open), the exchanges gather and publish information about buy or sell interest in a particular stock, including an indicative opening price.
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