NSE and BSE introduced the pre-open call auction sessions from October 18, 2010. The pre-open market session lasts for 15 minutes from 9:00 AM to 9:15 AM, and is divided into three parts:
9:00 AM to 9:08 AM
In the first 8 minutes, You can place the order, you can also modify or cancel the order in this session. Order entry session will randomly stop anytime between the 7th & 8th minute.
9:08 AM to 9:12 AM
In the next 4 minutes price discovery, order matching and the trade confirmation will be done, and orders will be executed. Order modification or cancellation would not be allowed in this session.
9:12 AM to 9:15 AM
The next 3 minutes are used to facilitate the transition from pre-open to regular session. All unexecuted orders in the pre-open session will be carried forward to the normal trading session by the exchange. In the event of the opening price not determined during the call auction period, all pending market orders would be moved to the continuous session at the previous close price.
Why Pre-Open Market Session?
In case a major event or announcement comes overnight before the market opens, such events are likely to bring heavy volatility on the next day when the market opens. Special events include merger and acquisition announcements, open offers, delistings, debt-restructurings, credit-rating downgrades etc which may have a deep impact on investors wealth. In order to stabilize this, pre-open call auction is conducted to discover the right price and to reduce volatility.
Pre-Open market session
At present, only NIFTY and SENSEX scrips at NSE and BSE respectively, have been enabled for trading in the Pre-open session by the exchanges. Scrips which will get excluded or included in the NIFTY or SENSEX indices will still be a part of the pre-open session.
Orders are entered into the system continuously filling the auction order book but remain unexecuted till the end of the order entry period i.e, 9:08 AM. Between 9:08 AM to 9:12 AM, orders get matched into trades at a single price. It follows the concept of the multilateral order matching i.e it will find a price at which max orders will be executed rather than bilateral matching.
Instead of executing trades right from the get-go, Pre-opening call auction takes all orders and then arrive at an equilibrium price. The equilibrium price is the price at which the maximum number of shares can be traded based on the demand and supply quantity and the price. The orders are then matched at the discovery price and trades take place at this price. Whereas in the Normal trading, session orders match instantly following price-time priority. Further, the normal market will open at this discovered price.
All your pre-market orders would go to exchange from 9.00 a.m. onwards i.e. in the normal trading session. For the scrips which are part of the pre-open session, you can place overnight orders or pre-market orders up to 9.00 a.m. and in the case of other scrips which do not form part of the pre-open session you can place overnight orders till the beginning of normal market session i.e. 9.15 a.m.
Overnight orders can be placed in all scrips i.e. Pre-open enabled scrips, as well as other scrips, enabled for equity trading. Overnight orders are orders which can be placed by you after normal market hours and before the next day’s trading session. Your overnight orders in pre-open enabled scrips would be sent to exchange during the pre-open order entry period (i.e. 9.00 a.m. to 9.08 a.m.) and in the case of overnight orders in other scrips, all such orders would be sent to exchange during the normal trading session (i.e. from 9.15 a.m.).