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Why aren't quotes after pre-trading sessions readjusted to the previous closing price?

Toronto Stock Exchange - The Canadian Stock Market

Why aren't quotes after pre-trading sessions readjusted to the previous closing price?

Postby hayes » Thu Jul 05, 2012 9:01 am

Hello everyone!

I understand the premise behind pre-trading sessions, and how they work though ECNs. I think my question would be easier to understand through a question. For example, The IBM stock price at the close on monday night was $100 a share. After the pre-trading session on tuesday morning, the stock is now up to $105. Once the stock market officially opens, does the immediate quote equate to the latest pre-trading quote (i.e does it open at $105 or does it open at the last closing quote of $100)? If it opens at $105, why would the exchange take the quote of an alternative trading system? Also, since the trades don't occur on the exchange but on an ECN, how do the two communicate quotes between each other? or should an ECN be considered a component of a stock exchange (for example Chi-x is part of the Toronto Stock Exchange).

I know it's a lot of questions, but thanks in advance for your help
hayes
 
Posts: 169
Joined: Mon Jun 25, 2012 6:56 am

Why aren't quotes after pre-trading sessions readjusted to the previous closing price?

Postby hayes » Thu Jul 05, 2012 9:08 am

Price change is based on the previous trading session's close. This makes sense since there is paltry volume, relatively, in the after-hours and pre-market trading sessions.
hayes
 
Posts: 169
Joined: Mon Jun 25, 2012 6:56 am


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