Pre-Opening Price Indications and Market Quality: Evidence from NYSE Rule 48

This paper explores the role of pre-opening price signals in price discovery and liquidity. NYSE Rule 48 suspends the responsibility of designated market makers for disseminating pre-opening price indications in the event of extreme market-wide volatility. Rule 48 speeds up the opening of stocks at the expense of lower liquidity. The absence of pre-opening price indications results in a decrease in liquidity during the first 30-minutes of the trading day. We interpret this finding as evidence that liquidity suppliers are less willing to provide liquidity in the absence of a reference point or benchmark regarding the value of a stock.

Keywords: Pre-opening price indications, NYSE, designated market maker, opening delay, liquidity, market volatility, Rule 48

JEL Classification: G01; G10; G14; G18

Suggested Citation: Suggested Citation

Chung, Kee H. and Chuwonganant, Chairat and Kim, Youngsoo, Pre-Opening Price Indications and Market Quality: Evidence from NYSE Rule 48 (May 19, 2019). Available at SSRN: https://ssrn.com/abstract=3830914 or http://dx.doi.org/10.2139/ssrn.3830914