The Nasdaq Stock Market has set up a new IPO Cross, which it says will use a “fair and transparent” process to begin secondary trading of initial public
offerings. NASDAQ received Securities and Exchange Commission (SEC) approval to implement the new IPO Cross.
NASDAQ says the new IPO Cross will benefit investors by providing fair executions at a single price that is reflective of supply and demand in the market; maximizing transparency at IPO opens by disseminating timely information to all investors; and by creating an efficient, open process in which all investors have the ability to enter orders and participate in price discovery.
“Given our success with the NASDAQ Opening and Closing cross auctions, we have extended this concept and have introduced a new IPO Cross that reflects the supply and demand in the market for IPOs and halt resumptions,” says Chris Concannon, Executive Vice President. “As the premier market for initial public offerings, NASDAQ is implementing this new electronic IPO to ensure transparency and fair executions that will create one single price for all IPOs.”
NASDAQ will introduce a new Halt Cross that will be used for re-opening halted securities later this month.
NASDAQ handled 59% of all IPOs last year. Through the first quarter of this year, NASDAQ has captured 70% of IPOs.
NASDAQ sets the primary opening price through the Opening Cross, which is a price discovery facility that crosses orders at a single opening price. The cross generates an opening price that is widely used throughout the industry. NASDAQ sets the primary closing price with the NASDAQ Closing Cross. It is a price discovery facility that provides net asset values for mutual funds. It crosses orders at a single closing price and disseminates timely information, providing transparency at the close. The Closing Cross generates a closing price that is widely used throughout the industry, including Russell Indexes, Standard & Poors, and Dow Jones. Also, NASDAQ announced that it will launch an IntraDay Cross, pending SEC approval, with three crosses per day as a mechanism for traders to better execute block trades.
NASDAQ’s Opening and Closing Crosses have experienced record volumes. The average Opening Cross volume this year was 19 million shares, 403 million dollar volume. NASDAQ’s Closing Cross has experienced maximum dollar volume in a single day of $5.8 billion on March 31, 2006. Last year’s Russell Rebalance had an all-time record share volume of 428 million shares.