Opening mechanisms play a crucial role in information aggregation following the overnight nontrading period. This article examines the process of price discovery at the New York Stock Exchange single-price opening auction. We develop a theoretical model to explain the determinants of the opening price and test the model using order-level data. We show that the presence of designated dealers facilitates price discovery relative to a fully automated call auction market. This is consistent with specialists extracting information from observing the evolution of the limit order book. In addition, the specialist's opening trade reflects noninformational factors such as price stabilization requirements.

Exchange seat prices are widely reported and followed as measures of market sentiment. This paper analyzes the information content of NYSE seat prices using: (1) annual seat prices from 1869 to 1998, and (2) the complete record of trades, bids and offers for the seat market from 1973 to 1994. Seat market volumes have predictive power regarding future stock market returns, consistent with a model where seat market activity is a proxy for unobserved factors affecting expected returns. We find abnormally large price movements in seats prior to October 1987, consistent with the hypothesis that seat prices capture market sentiment.

Opening mechanisms play a crucial role in information aggregation following the overnight nontrading period. This article examines the process of price discovery at the New York Stock Exchange single-price opening auction. We develop a theoretical model to explain the determinants of the opening price and test the model using order-level data. We show that the presence of designated dealers facilitates price discovery relative to a fully automated call auction market. This is consistent with specialists extracting information from observing the evolution of the limit order book. In addition, the specialist's opening trade reflects noninformational factors such as price stabilization requirements.