Some Traders Say Opening Cross Should Reduce Risk
Source: InstitutionalInvestor.com
Nasdaq's Opening Cross, a recently launched electronic auction that provides single transparent opening prices in the most liquid over-the-counter securities, is a good innovation for index, options and program traders to help reduce risk, according to some traders. “Until now, the Nasdaq did not have a way to line up buyers and sellers and have the open at one fair price,” said Viren Chandrasoma, director of program trading at Credit Suisse First Boston. “People played a big push/pull game and so many firms were involved that you were never sure whether that was a fair price.” In that process, firms took risks by guaranteeing prices to customers, explained Chandrasoma. “Now, it is more likely you'll get the fair, opening price.”
Although the rollout of the Opening Cross began in October, the auction will be completely operational for all OTC names by December when the quadruple witching – the expiration of contracts for stock index futures, stock options and single stock futures, as well as stock index options – occur on the same day. The Opening Cross will be good for investors in those names, which can be illiquid, noted Jamie Selway, founder and managing director of White Cap Trading. Additionally, the auction will be beneficial for retail investors and news-related trading, he said. |
