Pre-Opening Price Indications and Market Quality : Evidence from NYSE Rule 48

This paper explores the role of pre-opening price signals in price discovery and liquidity. NYSE Rule 48 suspends the responsibility of designated market makers for disseminating pre-opening price indications in the event of extreme market-wide volatility. Rule 48 speeds up the opening of stocks at the expense of lower liquidity. The absence of pre-opening price indications results in a decrease in liquidity during the first 30-minutes of the trading day. We interpret this finding as evidence that liquidity suppliers are less willing to provide liquidity in the absence of a reference point or benchmark regarding the value of a stock