The introduction of a closing auction means that the closing price of the securities involved will be determined in the same way as the opening price, i.e. by matching purchase and sale orders through an auction after the brokers have registered their orders in the Oslo Børs trading system. The closing auction will take place between 16:00 and 16:10. Oslo Børs believes that it is important not to reduce the market opening hours for ordinary trading, and particularly not the last 30 minutes of the trading day when the market opening hours of Oslo and New York overlap.
Closing prices for securities are significant in several respects. For Oslo Børs closing prices of individual securities provide the basis to calculate closing prices for the relevant indices and are also used for statistical and historical data. For investors closing prices often have particular significance for calculations of portfolio return and the valuation of mutual fund investments. In addition closing prices are often used as reference prices for large transactions. Many customers wish to carry out their transactions at the closing prices in particular securities.
Since the use of a closing auction will lead to new official closing prices being declared after 16:00 this will affect the calculation of indices. Oslo Børs will publish index prices that include the result of the closing auction as soon as the auction is completed.
The derivatives market will continue to close at 16:00. No official prices will be available for underlying shares in the period 16:00 to 16:10, and this would create difficulties for pricing if the derivatives market were to stay open until 16:10. For the same reason no closing auction will be held for warrants and subscription rights. Where the closing auction for a particular security cannot be completed, the last traded price before the start of the auction will continue in effect.
Current guidelines require that closing prices should not move by more than 2% during the last 2 minutes of the trading day. This approach has proved generally satisfactory, but in a sizeable number of cases it has resulted in Oslo Børs having to make significant changes to closing prices. Over the last 12 months adjustments to closing prices have had to be made several times a week. Oslo Børs takes the view that the market should determine closing prices in individual securities to the greatest extent possible. Oslo Børs believes that a closing auction will help to achieve this.
Oslo Børs has sought the views of the Association of Norwegian Stockbroking Companies, investment firms and selected institutional investors on the question of introducing a closing auction. The responses received have been entirely positive.
