Pre opening trading of stocks

Pre Opening Trading Session of Stocks

pre opening trading is introduced in Indian Stock Markets to reduce volatility during market opening trades.  Before pre opening trading introduction, first traded price is considered as opening price of the day. During regular market hours trades are executed as soon as orders are placed and matched on price-time priority. With introduction of this session, equilibrium price is the opening price of the day. Equilibrium price is the price where highest quantity can be matched.  Pre Opening session allows to collect orders and match them which is auction based system. During this session all orders are collected during first 7-8 minutes (Markets closes randomly between 9:07 and 9:08). For example one day Pre market may close at 9:07:05 and other day at 9:07:53.

During first 7 /8 minutes of pre market trading session (9:00 to 9:07 / 9:08) it is possible to place / modify/ cancel orders. In between 9:08 and 9:12 opening price of the day is determined.  No order can be placed / modified / cancelled during this period. Order matching, trade execution and trade confirmation takes place during these 4 minutes. Buffer period of 3 minutes from 9:12 to 9:15 is allowed for smooth transition from pre opening trading session to continuous market session.

Pre opening trading session is allowed only in the stocks which are part of either Nifty or Sensex. If new stocks are included in either of these indices, they are included in pre opening trading session.  But excluded stocks from these indices still be part of pre market session. There may be more than 50 stocks due to this (As on 25 Mar 2013 a total of 52 stocks are available for trading in pre opening session).  Download Full list of eligible stocks for pre opening session.

Update: As per NSE Circular NSE/CMTR/23062 dated 26 Mar 2013, pre open session will be extended to all the securities

Only market orders (At the Open Price) and limit orders are allowed in the session. Both market orders and limit orders are considered while determining opening price and equilibrium price. If there are  no limit orders, then equilibrium price will not be determined. Opening Price for that stock for that day will be first traded price during continuous market hours. If only market orders are placed for both buy and sell side, they will be executed at previous closing price of the stock.

pre opening trading session - determination of opening price

Trade matching in pre opening trading session

– Match-able buy limit orders with Match-able sell limit orders

– Imbalance buy or sell limit orders which are eligible against market orders

– Market orders with market orders.

unmatched orders will be placed in normal continuous trading with same price-time priority. For market orders they will be placed at opening price. If no equilibrium price (opening price) is not determined then market orders are placed at previous day closing price.

Price band for all securities during pre opening trading session will be 20%. If circuit filter of indices is triggered after determining opening prices during this session, trading shall be halted during normal market trading hours.  Effectively, this will not have any effect on pre market session. All eligible orders will be executed as usual.