The Prop Trader's Chronicles: Short-Term Proprietary Trading Strategies for Both Bull and Bear Markets

AUCTION STRATEGIES

The opening auctions and closing auctions on the NASDAQ ECN (the former Island ECN) and NYSE Arca ECN (Archipelago) are scheduled market crosses that determine the opening price and closing price of a stock, respectively. Depending on the particular stock or ETF, these auctions may only be available on one ECN or the other.

These may or may not be available to you at all on a retail brokerage. At most proprietary trading firms, you may need to ask your manager for permission to trade in pre-market in order to enter orders for the opening auctions.

For example, to participate in the NASDAQ opening auction, you may enter a short sell order with OPG time-in-force. As long as you've entered this order prior to the cutoff time (which varies depending on the ECN, so check with the respective system's website for current opening and closing auction cutoff times), your order will be matched against the buy orders marked with OPG time-in-force from the same session. These orders will not fill until approximately 9:30 in the morning Eastern at the market open when it will be matched automatically against OPG orders of the opposite side. Likewise, entering “CLO” time-in-force orders prior to the closing auction cutoff time will allow you to participate in the closing auction. In both of these auctions, there will be a single cross price rather than a best bid and best offer.