TY - JOUR T1 - Inside the Opening Auction JF - The Journal of Trading SP - 7 LP - 14 DO - 10.3905/jot.2012.7.1.007 VL - 7 IS - 1 AU - Bacidore, Jeff AU - Berkow, Kathryn AU - Wong, James Y1 - 2011/12/31 UR - http://jot.pm-research.com/content/7/1/7.abstract N2 - The opening auction can provide appealing price and liquidity opportunities. However, the auction mechanics can be vague and complex. This article provides a consolidated and detailed explanation of the auction mechanics and available preauction information for the NYSE and NASDAQ markets. The authors analyze NYSE and NASDAQ imbalance data from January 2011 to June 2011 to profile auction behavior. Three takeaways are most important for traders. First, imbalance volume is not representative of all the buying and selling interest in the auction; rather, it is only a slice of the interest revealed by the exchange. Second, in the NASDAQ auction, liquidity forms before any imbalance information is published, so traders need to carefully calculate how much can be traded while avoiding impact. Finally, in the NYSE auction, opening liquidity can change from orders added or canceled at any time up until the auction, so traders need to actively monitor the published feed to avoid suddenly becoming a larger participant than intended.TOPICS: Exhanges/markets/clearinghouses, equity portfolio management, quantitative methods ER -