Closing Price Discrepancies
Closing prices are essential information in the day to day financial decisions of investors. Learning how the media or the market data vendors present the market closing prices is an important component of making investment decisions.
Sometimes the closing price indicated in the website of the company in which you are invested is different from the closing price provided in the evening news. Sometimes, different news programs across different stations also report varying closing prices. Such closing price discrepancies among different sources can be very perplexing to new investors. There is, however, a very simply explanation for such closing price discrepancies.
Different Market Trading Hours
Regular market trading in major market centers like the American Stock Exchange, the New York Stock Exchange and the Nasdaq usually starts at 9:30 in the morning and ends at 4:00 in the afternoon (Eastern Time).
With the introduction of electronic communications networks in the 1990's, however, trading after regular market hours have become more prevalent. Now after-hours trading is no longer limited to institutional investors. Retail and individual investors have also started trading after hours - and these investors need information on securities' closing prices.
The prevalence of after-hours trading is the main cause of discrepancies in reported closing prices. Some news networks report the 4pm price as the closing price, while some report the price after 4pm as the closing price.
Remedying Closing Price Discrepancies
To some extent, the Consolidated Tape Association has already taken steps to remedy the confusion wrought by closing price discrepancies. To make closing prices uniform, it has designated the 4 pm price as the regular session closing price. It will, however, report a 4:15 market summary for the media and the investors. Such a summary will reflect last minute orders that came in before 4pm but were not executed in time for the 4pm closing.
Similar to the Nasdaq convention, it will also use the prefix T in the consolidated tape to distinguish stock prices after the 4pm regular session closing. After-hours stock prices will not affect the regular session closing price as well as the high and low prices of registered during regular market hours.
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