D-quote

Despite its name, the primary use of the D-quotes lies not with its discretionary pricing functionality, but with its execution advantages during the NYSE closing auction, where D-quotes can bypass several of the restrictions to a typical MOC or LOC order. In particular, MOC and LOC orders can be entered, canceled or modified only until 3:50 PM Eastern time. D-quotes on the other hand can be submitted, modified or canceled up to 3:59:50 PM Eastern time, giving a floor broker additional flexibility in participating in the closing auction.

This use case is evident as D-quotes are executed mostly during the closing auction, even though they may be entered at any time during the NYSE trading session. It is also reflected by how floor participants contribute to more than one-third of total NYSE closing auction volume.

Another benefit of D-quotes lies with the particular microstructure of the NYSE Order Imbalance data feed. The NYSE Order Imbalance feed disseminates a Closing Imbalance message continuously every 5 seconds from 3:45 PM to 4:00 PM Eastern time. MOC/LOC interest is incorporated into the closing imbalance at 3:50 PM, but D-quote interest is only incorporated into the feed starting at 3:55 PM. This means that a trading participant whose D-quote orders are to have a significant impact on the auction imbalance has an informational advantage for the five minutes between 3:50 PM and 3:55 PM. This in turn may be used to minimize execution impact or to manipulate prices.

For example, before 3:55 PM, a trader may place a large quantity of D-quotes to skew the auction imbalance, while establishing positions on the other side of their D-quotes. This creates the momentary appearance of supply or demand to other market participants when the D-quotes are incorporated into the imbalance feed, which may drive prices in favor of the trader's position. Then, immediately before the 3:59:50 PM cutoff for D-quotes, the trader can cancel their D-quotes which they had no intent of executing.

D-quotes may only be entered by a floor broker. In spite of this semi-discretionary element, D-quotes are widely used by electronic traders who can pay an extra hop and route their orders to a floor broker to be entered into the auction. Several brokerage firms, like Rosenblatt Securities, offer this as a low-touch service for electronic traders.

D-quotes are also called D Orders. Some literature may also refer to them as D-quote orders or D-ORDER orders.

A D-quote that participates in the closing auction is also called a Closing D Order.