What is an Opening Imbalance Only Order (OIO)
Let me explain what an Opening Imbalance Only Order, or OIO, really is. It's a type of limit order that you can use to provide liquidity specifically during the opening cross on the Nasdaq. If you're not familiar, a limit order is simply an instruction you give to your brokerage to buy or sell a certain number of shares at a specified price or better.
Breaking Down Opening Imbalance Only Order (OIO)
Here's how OIO orders work in detail. These orders are only executable during the opening cross and aren't displayed or disseminated to the market. For buy orders, they execute at or below the 9:30 a.m. bid price, and for sell orders, at or above the 9:30 a.m. offer price. Remember, OIOs must be limit orders—market OIOs aren't allowed. Since they're tied to the opening cross, you don't have to worry about them executing before the market opens, unlike continuous market orders.
If your OIO buy or sell order is priced more aggressively than the Nasdaq's highest bid or lowest offer before the open, it gets re-priced to match that bid or offer right before the cross. For instance, if you place an OIO buy order at $9.95 but the Nasdaq bid is $9.93, your order adjusts to $9.93. This mechanism adds essential liquidity and ensures that Market-On-Open (MOO) and Limit-On-Open (LOO) orders execute properly.
You can submit OIO orders on Nasdaq starting from 7 a.m. However, after 9:28 a.m., you can't update existing ones, though you can still enter new OIO orders.
Understanding Nasdaq
OIO orders operate within the Nasdaq system. Nasdaq is a global electronic marketplace where you buy and sell securities, and it also acts as the benchmark index for U.S. technology stocks. The National Association of Securities Dealers (NASD) created it to allow trading on a computerized, transparent system. In 2006, Nasdaq separated from the NASD and became a national securities exchange.
The term Nasdaq often refers to the Nasdaq Composite, an index of over 2,500 stocks listed on the exchange, including giants like Apple, Google, Microsoft, Oracle, Amazon, Intel, and Amgen.
From the start, Nasdaq has led in trading technology. It was designed as an alternative to the old, inefficient specialist system that dominated trading for nearly a century. Today, with rapid tech advancements, Nasdaq's electronic model sets the standard for markets around the world.
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