• Mar
  • 26
  • 2009
  • 4:16 PM

Closing Argument

By: Ray Pellecchia
File Under: ETFs / Indexes, Listed Companies, NYSE, NYSE Amex, NYSE Arca

Every now and then your humble blogger still hears mention of Nasdaq's closing cross, such as this past Tuesday when the cross never crossed, as reported by Bloomberg here.

That event came up in a conversation yesterday with an SAC (strategic-analysis colleague) that went something like this:

Me: On an average day, how many NYSE-listed issues does Nasdaq conduct a closing cross in, assuming the cross is working?

SAC: Twenty-eight.

Me: Twenty-eight, as in twenty-eight hundred?

SAC: No, as in twenty-eight, period.

Me: Oh. So why would people look to use it?

Me: Hello? You still there?

When he gave up trying to answer that question, he informed me that NYSE's share of trading in its listed issues at the close was 99.95 percent last month. The same measure for NYSE Amex equities was 98.5 percent. NYSE Arca had 99.7 percent of the close in its listed exchange-traded funds (ETFs). My ETF colleagues hasten to remind me that on 12 Jan., the NYSE Arca closing auction crossed a record 31 million shares in SPY, with a notional dollar value of $2.7 billion. The iShares Emerging Market ETF (symbol EEM) consistently crosses more than 1 million shares.

Why such high numbers here? When Nasdaq did compete with us on a close, we had much lower price slippage in our markets -- as much as 1/7th that of Nasdaq. Deeper liquidity, more accurate price discovery, broader participation, all at one of the most critical times of the trading day. I don't know why you'd look to trade the close anywhere else. For that matter, for those of you representing issuers: since setting a fair price for your investors is pretty important too, why would you list anywhere else?

Comments

Ray,
Wow. Those are very strong numbers. I would not have known that. I would love to see Opening cross stats. Would you have those?

by Jimmy on March 27, 2009 10:27 AM

Jimmy -- I'll check and let you know. Thanks as always for writing.

by Ray Pellecchia on March 27, 2009 11:36 AM

Ray,
The NYSE owns the opens and closes. I have one recommendation for the close, and that is to publish all eligible D-Quotes in the Live Closing Imbalance numbers. Too often the NYSE is publishing size imbalances on one side of the market, that in fact have an imbalance on the opposite side when including D-Quotes. Publishing a transparent view of the close will decrease volatility, and gaming, while at the same time restore the value and integrity of NYSE market data.

by Rick Oscher on April 7, 2009 6:48 AM

Rick -- Thanks for the suggestion, which I'll pass along.

by Ray Pellecchia on April 7, 2009 8:34 AM

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