Oct. 15, 2012
"Closing price" generally refers to the last price at which a stock trades during a regular trading session. For many U.S. markets, regular trading sessions run from 9:30 a.m. to 4:00 p.m. Eastern Time.
A number of markets offer after-hours trading trading and some financial publications and market data vendors use the last trade in these after-hours markets as the closing price for the day. Others use the 4:00 p.m. price as the closing price and display prices for after-hours trading separately.
To avoid confusion, the central distributor of transaction prices for exchange-traded securities - the Consolidated Tape Association - implemented a system designed to make closing prices uniform. Under this system, the regular session closing price for stocks is the 4:00 p.m. price. Any trades that take place during after-hours trading sessions are "tagged" with the letter "T" on the consolidated tape and will not affect the regular session closing price or the regular session high and low prices. The Nasdaq Stock Market uses similar conventions.However, the closing price for the same stock may continue to be reported differently by various media and market data vendors. This discrepancy in how the media and others report closing prices can cause confusion - especially when a single, low-volume after-hours trade occurs at a price that is substantially different from the 4:00 p.m. closing price. For example, the closing price listed on a company's website could be different from the price shown on the consolidated tape flashing across the bottom of a television screen. Or, the next day, the investor might hear that the stock opened "up" even though it opened "down" compared with the price at the 4:00 p.m. close.
Investors who check closing prices may want to consider the following:
- Is the closing price based on the regular trading session price established on the security's primary market?
- Does the closing price reflect the last trade reported over the consolidated tape as of the close of the regular trading session at 4:00 p.m. Eastern Time?
- Does the closing price reflect the last trade reported over the consolidated tape in after-hours trading?