2006issue C011
Constructing the single-price open from overnight flow
The regular-session open is a single-price crossing built from overnight order flow. Opening-only orders take that one print, then resting good-till-cancelled and day orders are walked before opening-dealer inventory finishes leftover imbalance.
- A regular session has only two single-price crossings: the opening auction and the closing auction.
- Overnight order flow can arrive as market orders or priced limit orders, and the opening print first matches that imbalance as evenly as possible before consulting the resting book.
- Opening-only orders fill at the auction print itself, even when excess opening-only sell interest forces that print below the prior close.
- Good-till-cancelled orders and day orders complete the match before opening-dealer inventory absorbs leftover imbalance, and any later cover of a short opening sale only compensates that inventory risk.
The session has two single-price crossings
A regular session has only two single-price crossings: the opening auction and the closing auction. In each of those matches every filled participant transacts at the same print. The rest of the session does not reuse that structure.
Overnight order flow sets the first net
Overnight order flow is buy and sell interest submitted after the prior close. It can arrive as unpriced market instructions or as priced limit orders before the open. The opening print is formed by matching that overnight imbalance as evenly as possible, then consulting orders already resting on the book.
Opening-only orders take one auction print
An opening-only order participates solely in the opening match and is filled at that auction print, even when the print differs from the prior close. Opening-only buyers receive the auction price itself, including when excess opening-only sell interest forces that print below the prior close. The designated opener cannot freely gap the print just to later sell inventory to leftover overnight buyers at the old close.
Resting orders complete the match
Resting liquidity used to complete the open includes good-till-cancelled orders as well as day orders and other remaining types. A good-till-cancelled order can remain on the book across sessions until filled or withdrawn and may be used to complete the opening match. A day order is a resting instruction that expires at the end of the session if it is still unfilled.
Dealer inventory finishes leftover imbalance
An opening imbalance is excess buy or sell interest that forces the opening match away from the prior close. When a buy-side imbalance forces a search up the book, the opener may sell inventory or sell short at the opening print. Opening-dealer inventory is the shares the designated opener sells from stock or sells short into the auction to finish a fair match, accepting later price risk. Any later cover of a short opening sale is compensation for inventory risk taken to supply shares, not an unconstrained privilege.
All readings on this track · 8 readings
- 1982Swing charts, stop-loss orders, and good-till-cancelled covers in a bond-market coil
- 1982Park good-till-cancelled targets after commissions at the chart bands
- 1987Write the danger-point stop before the trade is accepted
- 1989Christmas tree construction as a five-week monthly procedure
- 2006Constructing the single-price open from overnight flow
- 2008Overnight session routing for good-till-cancelled, limit, and market orders
- 2013Session cutoffs, good-till-cancelled orders, and exchange margin
- 2013Depth of market ladder versus resting order ticket