Nelson's Weblog: life / nasdaqClosing

Spraying NASDAQ

How do you set the closing price of a stock? You'd think it would be simple: the last trade of the day. But in a decentralized electronic market like NASDAQ there's no single auction, no single price. Today's NYT has a clear article explaining the problems that arise. The S&P 500 is experimenting with switching away from NASDAQ to the American Stock Exchange to set closing prices. AMEX is a traditional centralized human-mediated market; a single specialist making book means you have a single price.

The fascinating story here is the manipulation of closing process by "spraying":

a series of minimally sized orders, e.g., 100 shares, immediately prior to the open or close that, based on the amount of displayed size, outstrips short-term liquidity and creates excessive price movement on a temporary basis

— NASDAQ Head Trader Alert #2003-033

By jamming in a bunch of orders at the last second you can force a price swing. Why would you do that? Because a lot of compound securities are pegged to the closing price of individual stocks on NASDAQ. Crazy!

According to NASDAQ Head Trader Alert #2003-093 they have some quantitative process to detect spraying; when they find it, they take an average price from the last 15-30 seconds. Another interesting nugget is AMEX's memo to the SEC in November 2003. It's in response to NASDAQ trying to block the S&P change, basically explaining that this is a good change and AMEX has no say in it anyway.

The real problem is the notion of a 'closing price' at all. Why not trade 24 hours a day? It will happen soon enough. The world gets faster.

life
2004-01-29 17:06 Z


Mastodon @nelson@tech.lgbt Linkblog Wed 2024-11-20 Francis Williams painting The Platonic Blow Tue 2024-11-19 EmojiRain Bantam Tools Artframe Using OSM vector tiles Starlink sold out Fine-tuning LLMs at home Bluesky starter packs Mon 2024-11-18 Carbon Mapper Sun 2024-11-17 Love, Acceptance, and Screeching Modems Voyager 1 backup radio Gay Tblisi Usenet feed growth Methane mapping City99 console font Sat 2024-11-16 Lorraine Gervais Sill Justin's Linklog Thune 2004 blog campaign Fri 2024-11-15 Open source garage door Search Archives 2023 12 11 10 09 08 07 06 05 04 03 02 01 2022 12 11 10 09 08 07 06 05 04 03 02 01 2021 12 11 10 09 08 07 06 05 04 03 02 01 2020 12 11 10 09 08 07 06 05 04 03 02 01 2019 12 11 10 09 08 07 06 05 04 03 02 01 2018 12 11 10 09 08 07 06 05 04 03 02 01 2017 12 11 10 09 08 07 06 05 04 03 02 01 2016 12 11 10 09 08 07 06 05 04 03 02 01 2015 12 11 10 09 08 07 06 05 04 03 02 01 2014 12 11 10 09 08 07 06 05 04 03 02 01 2013 12 11 10 09 08 07 06 05 04 03 02 01 2012 12 11 10 09 08 07 06 05 04 03 02 01 2011 12 11 10 09 08 07 06 05 04 03 02 01 2010 12 11 10 09 08 07 06 05 04 03 02 01 2009 12 11 10 09 08 07 06 05 04 03 02 01 2008 12 11 10 09 08 07 06 05 04 03 02 01 2007 12 11 10 09 08 07 06 05 04 03 02 01 2006 12 11 10 09 08 07 06 05 04 03 02 01 2005 12 11 10 09 08 07 06 05 04 03 02 01 2004 12 11 10 09 08 07 06 05 04 03 02 01 2003 12 11 10 09 08 07 06 05 04 03 02 01 2002 12 11 10 09 08 07 06 05 04 03 02 01 2001 12 11 10 09 08 07 One good site MDN Nelson Minar nelson@monkey.org Blog licensed under a Creative Commons License		Spraying NASDAQ How do you set the closing price of a stock? You'd think it would be simple: the last trade of the day. But in a decentralized electronic market like NASDAQ there's no single auction, no single price. Today's NYT has a clear article explaining the problems that arise. The S&P 500 is experimenting with switching away from NASDAQ to the American Stock Exchange to set closing prices. AMEX is a traditional centralized human-mediated market; a single specialist making book means you have a single price. The fascinating story here is the manipulation of closing process by "spraying": a series of minimally sized orders, e.g., 100 shares, immediately prior to the open or close that, based on the amount of displayed size, outstrips short-term liquidity and creates excessive price movement on a temporary basis — NASDAQ Head Trader Alert #2003-033 By jamming in a bunch of orders at the last second you can force a price swing. Why would you do that? Because a lot of compound securities are pegged to the closing price of individual stocks on NASDAQ. Crazy! According to NASDAQ Head Trader Alert #2003-093 they have some quantitative process to detect spraying; when they find it, they take an average price from the last 15-30 seconds. Another interesting nugget is AMEX's memo to the SEC in November 2003. It's in response to NASDAQ trying to block the S&P change, basically explaining that this is a good change and AMEX has no say in it anyway. The real problem is the notion of a 'closing price' at all. Why not trade 24 hours a day? It will happen soon enough. The world gets faster. life 2004-01-29 17:06 Z Nelson's Weblog • life → evaluation, zurich2005