TheCorporateCounsel.net

Bloomberg recently reported that a third of S&P 500 trades are now executed in the last 10 minutes of the trading day, based on data from BestEx Research. The standard trading day is 390 minutes. The article attributes the concentrated trading to index funds that buy and sell near the closing of trading since “the last prices of the day are used to set the benchmarks they aim to replicate.” The increase is part of the decade-long trend of increasing assets in passive equity funds and active funds following along to take advantage of the liquidity.

The article goes on to describe the mechanism to determine closing prices — the closing auction — which “runs alongside the last minutes of continuous trading” and highlights that “nearly 10% of all US shares were traded in that closing auction last month.” If you haven’t had to deal with a trading halt recently and ever feel like those Market Watch notices the stock exchanges require are just one more thing to do in the throes of releasing material news, understanding this process and the trading volume over a short period may be a good reminder of the purpose behind those notification obligations.

NYSE recently reminded listed companies that, in addition to the 10-minute prior notice for material news announcements, they are also prohibited from publishing material news after the official close until the earlier of 4:05 p.m. ET or the publication of the official closing price for the security. NYSE states that “the requirement is designed to alleviate confusion caused by price discrepancies between trading prices on other markets after the NYSE official closing time, which is generally 4:00 p.m. ET, and the NYSE closing price upon completion of the auction, which can be after 4:00 p.m. ET.” It also reminds companies that they can refer to NYSE Connect for information about the timing of completion of closing auctions.

For more on this and other NYSE requirements, see our “NYSE Reporting Obligations” Checklist.

– Meredith Ervine