Closing Price

Many investors use closing prices reported in the newspapers to monitor their holdings. But not all closing prices are the same, and the differences may be important to you. Here's what you should know about closing prices:

"Closing price" generally refers to the last price at which a stock trades during a regular trading session. For many market centers, including the New York Stock Exchange, the American Stock Exchange, and the Nasdaq Stock Market, regular trading sessions run from 9:30 a.m. to 4:00 p.m. Eastern Time.

But a number of market centers offer after-hours trading. Some financial publications and market data vendors use the last trade in these after-hours markets as the closing price for the day. Others, however, publish the 4:00 p.m. price as the closing price and display prices for after-hours trading separately.

This discrepancy in the way the media and others report closing prices can cause confusion – especially when a single, low-volume after-hours trade occurs at a price that's substantially different from the 4:00 p.m. closing price. For example, an investor might read on a company's website that its stock closed at one price but then see a much different price on the consolidated tape flashing across the bottom of her or his television screen. Or, the next day, the investor might hear that the stock opened "up" when, in fact, it opened "down" compared with the price at the 4:00 p.m. close.

To help clear up this 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 will be the 4:00 p.m. price. Sometimes orders come in before 4:00 p.m., but they can't be filled until after 4:00 p.m. Therefore, the CTA produces a 4:15 p.m. Market Summary for vendors and the media that includes regular session trades that are reported before 4:15 p.m. but should be included in regular session 4:00 p.m. prices. Any trades that take place during after-hours trading sessions will be "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, which operates a similar system for trades in its securities, uses similar conventions.

Because the closing price for the same stock may continue to be reported differently among various media and market data vendors, investors should try to understand what the reported price is based on. For example:

• Does the newspaper or vendor indicate that the closing price is based on the regular trading session price established on the security's primary market, such as the New York Stock Exchange, the American Stock Exchange, or the Nasdaq Stock 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?

Investors may be able to find this information if their newspaper or vendor system describes how the closing price is being reported.