Marking the Close

"Marking the close" is a form of market manipulation. The practice involves attempting to influence the closing price of a security by executing purchase or sale orders at or near the close of normal trading hours. Such activity can artificially inflate or depress the closing price for the security and can affect price of "market-on-close" orders or otherwise operate as an improper influence in the marketplace.

The practice of "marking the close" will have a disproportionately adverse impact when it occurs on an expiration Friday or on an index rebalancing day. On rebalancing days, securities are added to and deleted from an index. Market makers often receive large market-on-close orders on expiration Fridays and rebalancing days as customers adjust their portfolios to reflect the expiration of options, index options, futures and the rebalanced index. Accurate pricing at and around the market's close on index rebalancing days is critically important to a fair and orderly rebalancing process.

This report focuses on any transaction(s) within the last remaining minutes of the trading day to detect instances where traders may be attempting to influence the closing price of a security. Currently, the parameters for the report are:

• Equities must have less than 50,000 shares volume for that day. If daily volume is unknown, the security will be checked.
• Accounts to be checked must have profit/loss calculations enabled.
• Executions for review must have occurred between 15:58:00 and 16:00:00 EST and must be marked "REGULAR" (i.e. journal entries, corporate actions, buy-ins and assignments will not be checked).
• The executions must be increasing the traders holdings.

Examples (assuming XYZ is a low volume security):