What Is a Closing Quote?
A closing quote is a security's final regular-hours trading price for the day. Because of globally interconnected markets, extended-hours trading sessions, and the forces of supply and demand, the previous day's closing quote will not necessarily be the next day's opening quote. The first trade of the next day occurs as the market makers meet the first buyers and sellers to agree on a price, which may or may not be the same as the previous day's close.
Indexes, traders, and analysts use the closing quote to compare the change in the price of a security from day to day. The official closing prices are tracked on the New York Stock Exchange (NYSE).
Key Takeaways
- Closing prices are the final quote of the day traded on, issued at 4:00 pm Eastern time.
- Closing prices are determined through auction by market makers and trading participants.
- The amount of volume traded at the close has greatly increased along with the popularity of index funds and ETFs.
Understanding Closing Quotes
On most U.S. exchanges, closing quotes are those that occur at precisely at 4 p.m. EST, Monday through Friday. That is when securities traded on these exchanges close their session. Regular session times last from 9:30 a.m. to 4 p.m.—except for major holidays, when the exchanges are closed. For the NYSE and Nasdaq, these holidays are New Year's Day, Martin Luther King Jr., Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
The market close that produces closing quotes is the busiest part of the equity trading day. Many investors choose to trade at this time as it brings together one of the highest concentrations of buyers and sellers.Investors can choose to trade specifically at the closing price of the day for a stock by submitting a market-on-close order. These orders must be submitted on the NYSE by 3:45 p.m. and on the Nasdaq by 3:50 p.m. to ensure execution.
Generating Closing Quotes and Extended Trading
The closing price is considered the most important price of the day for investors and exchange-listed companies since they reflect market interest in a stock. Closing quotes on the NYSE are generated through a closing auction. The closing auction on the NYSE now represents over 8% of NYSE-listed daily trading volume.
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This figure has nearly tripled over the past 10 years, primarily as a result of the increased popularity of index funds and ETFs. These funds attempt to track to a particular index and will attempt to reconcile the days trading with the closing quote, so it drives more volume to the closing price for the day.
NYSE auctions combine both electronic trading technology and human judgment from the open outcry system of floor brokers physically located at trading stations on the exchange floor. Floor brokers known as Designated Market Makers (DMMs) help facilitate closing auctions on the NYSE. DMMs set closing prices based on all interest expressed in the stock through closing market and limit orders and also step in to trade to offset any auction imbalances between buyers and sellers present at the closing bell.
Nasdaq conducts a similar process to generate closing quotes called the closing cross. This closing process begins with the receipt of all closing orders, timely submitted on-close and imbalance-only orders. These orders are filled at prices set by the closing cross.
While the highest trading volume still occurs during regular trading hours, shares can also be traded pre-market and after hours. The extension of the trading day outside of standard market hours facilitates the trading of stock around events that typically result in significant price movements, such as the release of quarterly earnings reports, which occur before or after regular trading hours.
