NYSE Closing Auction
https://www.nyse.com/network/article/nyse-closing-auction?utm_source=homepage&utm_medium=banner
The above article explains how the NYSE Closing Auction works. They explain that as investing in the market has become more popular there have been more rules put in place to limit liquidity but also create a competitive investment market. The NYSE Closing Auction is one of the few ways institutional investors can establish sizable positions without too much complexity. The NYSE Closing Auction is the last event of the day and there are are 3 types of bids Market-on-Close (MOC), Limit-on-Close (LOC), and NYSE Floor Broker.
Market-on-Close (MOC) means that the order must be placed at the end of the auction. No matter what the price of the stock is at the end of the auction they order will buy the stock at that value. When relating this concept to what we have learned in class, we can say that the buyer is sure that their true value will be lower than the closing price of the stock. Limit-on-Close (LOC) means that the buyer sets thier desired price for the stock. If at the end of the auction the price of the stock is below or at the set price then the LOC order will be executed. Based on the concepts we learned in class, we can say that the buyer should slitly shade their true value. If they place an order like this they will either get the stock and surplus or be where they started (not negative). The last type of bid is the NYSE Floor Broker. This type of bidding is only offered to a select few and it allows the investor to continuously adjust their bid. In this senario the bidder can do whatever they want and try and aim for whatever surplus they want. From what we learned in class, it is not smart to go for extra surplus and lose the stock. If the bidder can get the stock and surplus they should go for it rather than trying to get better surplus.