Reviewed by Feb 19, 2021| Updated on
A cross trade is a practice where a broker buys and sells the same stock at the same price for security are offset without recording the trade on the exchange. That means the broker simultaneously makes trade between two separate customers at that price. It is not permitted on most of the exchanges.
Another variant of this is the market opening and closing crosses. Cross is also used with regard to securities trades and refers to a type of foreign exchange trade. The NASDAQ collects data on all buy and sell interests within the two minutes before its opening this information collected is referred to as the opening cross.
Traders can post orders to buy at the opening price or to buy if there is an order imbalance. This dissemination of pricing interest helps to limit disruptions in liquidity.
The closing cross on NASDAQ matches bids; it presents a given stock to create the final price of the day. Traders can place orders that can either be ""market at the close"" or ""limit at the close."" Here, the former means to buy or sell at the official closing price.
A cross trade can also be done legitimately when a broker trades matched buy and sell orders for the same security across different clients and reports them on an exchange. The cross trades must be executed at a price that corresponds to the prevailing market prices. Cross trades are allowed when brokers are trading clients’ assets between accounts, for derivatives trade hedges, and certain block orders.
You must know the following regarding a cross: