IOO is an acronym that stands for "Index Open Outcry," which refers to a method of trading and pricing stocks on the New York Stock Exchange (NYSE). In this traditional trading method, also known as the auction system or floor trading, traders and brokers physically gather on the NYSE trading floor to buy and sell shares.
With IOO, traders congregate in a designated trading area known as the "trading post" or "trading pit." The specialists, also called market-makers or floor brokers, represent various stocks listed on the NYSE. These specialists control the trading process for specific stocks by managing the supply and demand dynamics, facilitating the execution of buy and sell orders, and ensuring price efficiency and liquidity within their assigned stocks.
During an IOO trading session, specialists publicly display their bid and ask prices for a particular stock in the trading pit. Traders, either representing themselves or institutional investors, can then interact and negotiate with the specialist to determine the trade price and quantity.
IOO brings human interaction into the stock trading process, allowing traders to observe others' actions, interpret market sentiment, and react accordingly. However, technological advancements and the rise of electronic exchanges have significantly reduced the reliance on IOO, as most trading today is conducted electronically through computerized trading systems or electronic communication networks.
