Pre-Market Call Auction
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- Date Submitted: 02/18/2011 11:52 PM
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PRE-MARKET CALL AUCTION
CONTENTS PAGE
Acknowledgement 2
1. Introduction 4
2. Pre-Open 5
3. Significance of Pre-Open Session 5
4. List Of Securities 6
5. Trading Hours 8
6. Trading Session 9
a. Order Collection Period
b. Order Matching Period
7. Order Types Permitted During Pre-Open 10
8. Determination Of Equilibrium / Opening Price 11
9. Unmatched Order 12
10. Risk Management 13
11. Market Information Disseminated During Pre-Open 14
Bibliography 13
INTRODUCTION
In a move to reduce price swings, India's two largest stock exchanges will allow investors to put in bids for shares before the bourses open. The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) have decided to implement the 15-minute 'pre-market call auctions' window from Monday, October 18, 2010.
Both the exchanges have already received the go-ahead from market regulator the Securities and Exchange Board of India (SEBI) to start the ‘pre-market call auctions’.
The issue regarding call auction and its use in various session, including pre-open session was deliberated in Secondary Market Advisory Committee (SMAC). Based on the recommendation of the committee and proposal received from the stock exchanges, it has been decided to introduce call auction mechanism in pre-open session.
Price discovery is a difficult proposition in the existing trading system. So far, at the start of the day in stock market, buyers and sellers are not aware of what will be the fate of their buy and sell requests. So someone gets a fat profit and someone gets a huge loss. In order to streamline this and to help the buyers and sellers give an idea about the likely price of the interested shares, the buy and sell share quantities are matched in totality. This will give...
CONTENTS PAGE
Acknowledgement 2
1. Introduction 4
2. Pre-Open 5
3. Significance of Pre-Open Session 5
4. List Of Securities 6
5. Trading Hours 8
6. Trading Session 9
a. Order Collection Period
b. Order Matching Period
7. Order Types Permitted During Pre-Open 10
8. Determination Of Equilibrium / Opening Price 11
9. Unmatched Order 12
10. Risk Management 13
11. Market Information Disseminated During Pre-Open 14
Bibliography 13
INTRODUCTION
In a move to reduce price swings, India's two largest stock exchanges will allow investors to put in bids for shares before the bourses open. The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) have decided to implement the 15-minute 'pre-market call auctions' window from Monday, October 18, 2010.
Both the exchanges have already received the go-ahead from market regulator the Securities and Exchange Board of India (SEBI) to start the ‘pre-market call auctions’.
The issue regarding call auction and its use in various session, including pre-open session was deliberated in Secondary Market Advisory Committee (SMAC). Based on the recommendation of the committee and proposal received from the stock exchanges, it has been decided to introduce call auction mechanism in pre-open session.
Price discovery is a difficult proposition in the existing trading system. So far, at the start of the day in stock market, buyers and sellers are not aware of what will be the fate of their buy and sell requests. So someone gets a fat profit and someone gets a huge loss. In order to streamline this and to help the buyers and sellers give an idea about the likely price of the interested shares, the buy and sell share quantities are matched in totality. This will give...