Closing Cross
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Definition of 'Closing Cross'A price discovery mechanism on the Nasdaq that crosses buy and sell orders at a single price at the end of the regular market session. Closing crosses attempt to set a closing price that is the most transparent and is indicative of actual market activity surrounding the close. The closing cross is computed by combining orders from both the open order book (which lists all open orders) as well as the closing order book (which lists "on close" orders) to arrive at a single price for the close. |
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Investopedia explains 'Closing Cross'Apart from its benefits like price discovery and transparency, the closing cross provides a facility for resolving order imbalances that arise in critical events such as expiration dates for index futures and options, and index rebalances.The Nasdaq closing cross process works as follows: Nasdaq accepts market-on-close (MOC) and limit-on-close (LOC) orders – which are executable only during the closing cross – between 7am and 3:50pm EST. These orders are executed only at the price determined by the closing cross, which means that LOC orders will receive a better price if the buy / sell order is at a price greater / lower than the closing price. Thus, if an LOC buy order specifies a limit price of $10 for a stock and it closes at $9.99, the order will be filled at $9.99. At 3:50pm, Nasdaq begins the closing auction process and disseminates information about any order imbalance that exists on the closing book through its Net Order Imbalance Indicator (NOII), along with an indicative closing price. At exactly 4pm, the closing book and the Nasdaq continuous book are brought together to create the Nasdaq closing cross. The closing cross price is distributed to industry immediately after its occurrence. |
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