Market Maker Responsibilities - Times For Entering A Quote

The NASDAQ opens for trading at 9:30 AM EST with an opening cross. Market makers in anticipation of the opening may enter bids and offers based on orders that the firm has received from customers or for the firm’s account beginning at 7:00 AM. Quotes and limit X orders that do not lock or cross the market become part of the “book”. If a market maker enters a quote or order that locks or crosses the market, the order or quote is sent to the “queue” to wait for execution. Quotes and orders that are placed in the queue are executed against the best bid or offer available at that time. Orders that cannot be executed in the queue are sent back to the book.

The Opening Cross

The Opening cross begins at 9:28 AM. At this time the NASDAQ Market Center Execution System automatically executes orders. Orders placed after 9:28 AM may not be cancelled. Orders placed after 9:28 AM may only be changed if the change to the order makes the order more aggressive. A change that increases the size of the order or improves the price would make the order more aggressive. For a buy order an improved price would be a higher limit price, for a sell order an improved price would be a lower limit price. All orders that are executed during the opening cross will be reported to ACT with a .T modifier. The official NASDAQ opening print is disseminated by the system at “9:30 X”.

TAKE NOTE!

Orders that are entered prior to the opening for regular hours execution may not be cancelled or modified during the opening cross.

Order Imbalances

Often during the opening cross as a result of news or other events, there are either buy side or sell side order imbalances for any given security. During the opening cross starting at 9:28 AM order imbalance messages will appear in the NASDAQ net order imbalance indicator (NOII) system. Between 9:28 AM and 9:29 AM indications of the imbalance are sent out every 15 seconds. After 9:29 until the open imbalance messages are sent every 5 seconds. Among other information, order imbalance indications include the direction and size of the imbalance, the percent away from the current inside market and the indicative price. The indicative price is the price at which the opening cross would take place if executed at the time the imbalance indication was disseminated.

The NASDAQ Official Opening Price / NOOP

NASDAQ opens for regular hours trading at 9:30 AM EST. At that time the orders that are held in the queue which have not been paired off are executed and reported to the tape. The first trade that is reported to the tape creates the NASDAQ Official Opening Price (NOOP). If at 9:30:15 no trades in the queue have been matched and reported to the tape, the first, last sale trade that is reportable to the tape becomes the NOOP. NASDAQ has created new types of orders as a result of the creation of the opening cross. The orders are:

  • Early regular hours, orders entered prior to 9:28 AM for the regular trading session
  • Late regular hours, orders entered after 9:28 AM for the regular trading session
  • OO On Open, market and limit orders that are entered to be executed at the opening price only
  • IO, Imbalance Only, orders that are only to be executed against imbalances on the open that are away from the bid or offer at 9:30 AM
  • X- Extended hours orders are entered before or after the market opens and can be day, GTC or IOC

The Closing Cross

NASDAQ has developed the closing cross to determine a uniform closing price for securities at the end of the trading day. Customers and firms may enter on the close orders at any point starting at 7:00 AM up until 3:50 PM. After 3:50 PM, on the close orders may not be entered, cancelled or modified. On the close orders that may be entered include both market and limit on close orders. Starting at 7:00 AM and up until the close of the market, firms may enter imbalance only orders. Imbalance only orders must be priced and will not be executed prior to the close nor will they be included in the market maker’s displayed quote prior to the close.

TAKE NOTE!

The NASDAQ crossing network provides intra day and post closing executions. All crosses will be executed anonymously and will provide greater liquidity. The scheduled crossing times are 10:45 AM, 12:45 PM, 2:45 PM and 4:30 PM. Orders may be entered for the next cross only, for regular hours crosses or for all subsequent crosses. Orders entered for all crosses will not be eligible for the opening or closing cross.

The NASDAQ Halt Cross

If a security is halted as a result of news or other corporate developments the security will reopen with an opening cross. The NASDAQ halt cross is designed to provide greater price discovery and allow all market participants and investors an opportunity to execute orders at the best available price once the news has been disseminated. The net order imbalance indicator (NOII) will disseminate  order  imbalance  information  every  5 seconds between the time quoting begins and the time trading resumes.

The Opening Cross
Related Articles
  1. Professionals

    Series 99

    FINRA/NASAA Series 99 Exam Guide
  2. Professionals

    Series 24

    FINRA/NASAA Series 24 Exam Guide
  3. Professionals

    Breaking Down Financial Securities Licenses

    Find out which exam you need to begin your career as an investment professional.
  4. Professionals

    Sell-Side Analysts Need Series 86/87 Exams

    Though these tests are not particularly difficult or comprehensive, passing them is mandatory to work as a sell-side analyst.
  5. Professionals

    Succeeding At The Series 63 Exam

    Your career as a securities agent begins with this test. We'll show you how to score high.
  6. Professionals

    Becoming A Registered Investment Advisor

    To become a registered investment advisor requires specific licensing, qualifications and regulations, but the greater freedom may be worth it.
  7. Term

    Understanding the Maintenance Margin

    A maintenance margin is the minimum amount of equity that must be kept in a margin account.
  8. Investing Basics

    Brokers and RIAs: One and the Same?

    Brokers and registered investment advisors have some key differences. Here's what you need to know.
  9. Professionals

    Is a Google Robo-Advisor on the Horizon?

    It's possible that Google is looking to get into the robo-advisor business, either as a new venture or as a way to provide more benefits to employees.
  10. Professionals

    Understanding Series 6

    Upon successful completion of the Series 6, an individual will have the qualifications needed to sell open end mutual funds and variable annuities
RELATED TERMS
  1. Series 6

    A securities license entitling the holder to register as a limited ...
  2. Comprehensive Automated Risk Data ...

    The Comprehensive Automated Risk Data System (CARDS) is an initiative ...
  3. Corporate Financing Committee

    A regulatory group that reviews documentation that is submitted ...
  4. Series 79

    A examination to ensure a candidate is qualified to become a ...
  5. Research Analyst

    A person who prepares investigative reports on equity securities. ...
  6. Series 34

    An exam required for individuals seeking to engage in off-exchange ...
RELATED FAQS
  1. How does a broker decide which customers are eligible to open a margin account?

    Brokers have the sole discretion to determine which customers may open margin accounts with them, although there are regulations ... Read Full Answer >>
  2. What are some of the major regulatory agencies responsible for overseeing financial ...

    There are a number of agencies assigned to regulate and oversee financial institutions and financial markets, including the ... Read Full Answer >>
  3. Why is the Nasdaq more heavily weighted to tech stocks than other stock exchanges?

    The Nasdaq became the world's first electronic stock exchange at its inception in 1971. The exchange's dedication to advancing ... Read Full Answer >>
  4. How are margin calls regulated by the SEC?

    The Federal Reserve Board and the Financial Industry Regulatory Authority (FINRA), not the Securities and Exchange Commission ... Read Full Answer >>
  5. If I have only a limited amount of time to study for the Series 6, what should I ...

    The Series 6 Investment Company and Variable Contracts Products Representative Qualification Examination is administered ... Read Full Answer >>
  6. How does an underwriter syndicate work together on an initial public offering (IPO)?

    An underwriting syndicate is a group of investment banks that share the responsibility of marketing the shares of a company ... Read Full Answer >>
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!