Forum Archive Index - October 2001

["Jeremy" <jeremy@electrosilk.net>]

> I'm fairly new to share trading too. But I think it is due to
> bids/offers/quotes etc being made or amended while the exchange is closed.
> For example, a security might close a certain day at $2.40. If the lowest
> quote to sell then moves up to $2.46 (information through
market-depth*)then
> a trader wishing to buy would have to place a bid at $2.46 to be sure of
> securing a trade at opening time the next morning.
>
> * Market depth shows current bids/quotes and volumes. On the NZSE, this is
> only available through your broker. On other exchanges it is more readily
> available on the net.
>
> Now somebody who actually knows something can correct the flaws/ mistakes
in
> my answer...?

I asked a similar question a while ago and got a very good answer on this
list from one of the brokers.

The opening price the next day is based on the pre-opening  bids to buy and
sell.  Basically a number of people put up bids to buy or sell at various
prices.  The highest buy bid price is matched against the lowest sell bid
price until all possible transactions are matched (given the volumes of buy
and sell bids).  Then all transactions are processed at a calculated price,
which becomes the opening price.  The formula for the opening price is set
by the exchange and uses the bid price and quantities to set the figure.

Jeremy



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