A: The ASX uses a single price auction to determine where a stock “closes”. This auction occurs very close to 4.10pm (it occurs randomly). It uses the same formula when a stock opens, which again occurs (quasi randomly) between 10.00am and 10.10am.

 

The formula is a bit complicated, but essentially, it is the price where buyers and sellers match – that is, the price after all overlapping bids and offers have been matched out. Importantly, all buyers and sellers receives the one single price, notwithstanding whether they have bid or offered a different price.

 

Back to your example, someone wanting to buy at $37.39 really wants to buy. He/she could pay as much as $37.39, but probably expects to pay considerably less. By sticking in such a high price, he is making sure that he is at the top of the queue.

 

Using the same example, someone wanting to sell at $31.36 really wants to sell. He/she could receive as little as $31.36, but probably expects to receive considerably more. By sticking in such a low price, he/she is making sure that he/she is at the top of the selling queue.

 

Both parties will trade because the prices overlap. The price they will receive will be somewhere in between and depend on all the other buyers and sellers.

 

Where a stock close one trading day, and opens the next day, are not directly related. The market is discontinuous. However, all things being equal, it is going to be a major input into the opening price.