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Thursday, August 22, 2019

Equity Trader Alert #2019 - 66
Reminder: Nasdaq Closing Auction Enhancements

Category:

  • New Functionality

Markets Impacted:

Contact Information:

Resources:

On November 4, 2019, Nasdaq will be introducing enhancements to the Closing Auction process. Nasdaq is making these changes to increase the transparency and flexibility for firms participating in the closing auction price discovery process. The upcoming changes are as follows:

1. Disseminating Early Closing Auction Imbalance Information

  • The early auction information will begin disseminating at 3:50 p.m. ET and use the existing Net Order Imbalance Indicator (NOII) format.
  • The information disseminated will consist of Paired Shares, Imbalance Shares, Imbalance Direction, and the Current Reference Price.
  • The Near and Far Price information will not be published during this period and instead will be populated with “0”.
  • The frequency of dissemination will be every 10 seconds. Beginning at 3:55 p.m. ET, Nasdaq will publish the NOII as it does today, including the near and far reference prices, with the frequency of dissemination being every second.

2. Update to Entry, Modification and cancellation of MOC/LOC orders between 3:50 p.m. ET and 3:55 p.m. ET

  • Firms will be allowed to enter all on-close order types including MOC and LOC without any restrictions during the period when early auction information is being disseminated (between 3:50 and 3:55). This will enable firms to increase their participation based on imbalance information that is disseminated after 3:50.
  • The cancelation or modification of On-Close orders will not be permitted after the imbalance information has been published (3:50 p.m. ET) ensuring the auction preserves its integrity.

3. Increased flexibility to the Late LOC Order

  • Late LOC orders entered after 3:55 p.m. ET will be accepted at their limit price, unless its limit price is more aggressive than either the 3:50 p.m. ET or 3:55 p.m. ET Reference Prices, in which case the Late LOC order will be re-priced to the more aggressive of the two Reference Prices. Utilizing both Reference Prices will promote price stability and added flexibility to offset auction imbalances in the closing auction price discovery process.

NOII and Auction Cutoff times will be:
Eastern Time (ET)

3:50p.m.

Early Dissemination of closing information begins.

  • Nasdaq continues accepting Market-On-Close, Limit-On-Close, and Imbalance-Only orders at any time prior to the cutoff time, but they may not be cancelled or modified.
3:55p.m.

Full Dissemination of closing information begins.

  • Nasdaq stops accepting entry of Market-On-Close orders.
  • Limit-On-Close orders may be entered until 3:58 p.m., but may not be cancelled or modified
  • Imbalance-Only orders may be entered until 4:00 p.m. but may not be cancelled or modified
3:58p.m. Nasdaq stops accepting entry of Limit-On-Close orders.
4:00p.m. Closing process begins.

Testing Opportunities

Testing is currently available in the Nasdaq Testing Facility (NTF). Production testing will be available during the November 2 User Acceptance Tests (UAT).

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Nasdaq (Nasdaq: NDAQ) is a leading global provider of trading, clearing, exchange technology, listing, information and public company services. Through its diverse portfolio of solutions, Nasdaq enables customers to plan, optimize and execute their business vision with confidence, using proven technologies that provide transparency and insight for navigating today's global capital markets. As the creator of the world's first electronic stock market, its technology powers more than 90 marketplaces in 50 countries, and 1 in 10 of the world's securities transactions. Nasdaq is home to approximately 3,900 total listings with a market value of approximately $13 trillion. To learn more, visit: business.nasdaq.com.

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