What happens during Pre-Open Session & How it works?

  Requirement for Pre-Open Market Session

Before year 2010, the the price at which the first matched order of the day gets executed was considered as opening price of that day. This was resulting in tremendous volatility in the stock markets during the beginning of the day especially where there was a overnight events like election results, announcement of critical government policies etc.

With intention to reduce this volatility, the exchanges came up with an innovative method to arrive at the opening price of the day. The method used is very interesting one. Let us understand how the opening price is discovered during the pre-open market session in NSE and BSE in this post.

  Timings of Pre-Open Market Session

A 15 minute period between 9.00AM -9.15AM before the normal market open is called the Pre-Open session. This duration is used at arriving the ideal opening price. This 15 minute period is broken down into three slabs. The details are given in the below table

SessionTimeAction
Order Entry Period9:00am - 9:07/08amThe client can place new orders, modify / delete the orders. The order entry can stop randomly between 7th and 8th minute.
Price Discovery Period
(Order Matching & Confirmation Period)
9:08am - 9.12amThe exchange arrives at the Opening Price, trades the matchable orders at Opening Price. The client cannot modify or delete the orders during this period
Buffer Period9:08am - 9.12amUsed as transition period between pre open and continuous trading sessionBottom of Form
Normal Market9:15am – 3:30pm9:15am– 3:30pm

  Finding the Equilibrium Price

The opening price of the day is determined by finding the equilibrium price during the pre-opening session. It is very difficult to explain the entire process in words. So let us understand this by taking an example.

Let’s say a scrip had closed at Rs 100 in previous day and during the pre-opening session, exchanges received the orders something like this.

PriceBuyerBuy Order QuantitySellerSell Order Quantity
105Trader H250
104Trader G300
103Trader A200Trader F500
102Trader B700Trader E100
101Trader C400
100Trader D1000

Interpretation of the above table:

Trader A is telling that he is interested to buy 200 shares of the company if and only if he get the price less than or equal to Rs 103. Similarly Trader B is ready to buy 700 shares when price is less than or equal to Rs 102. And nobody is interested to buy above Rs 103.

Similarly on sell side, trader E wants to sell 100 shares if he gets the price of Rs 102 or above. Trader F wants to sell 500 shares only if the price is equal or greater than Rs 103. And nobody wants to sell if the price is less than Rs 102

Now let us two more columns to above table, “Total Buy Quantity” and “Total Sell Order Quantity” 

PriceBuyerBuy Order QuantityTotal Buy Order QuantityTotal Sell Order QuantitySell Order QuantitySeller
1051150250Trader H
104900300Trader G
103Trader A200200600500Trader F
102Trader B700900100100Trader E
101Trader C4001300
100Trader D10002300

Trader A is ready to buy at less than Rs 103 and Trader B at Rs 102. So at Rs 102, both Trader A and B are willing buy. Hence exchanges has to match total 200 (Trader A’s) + 700 (Trader B’s) = 900 quantities at Rs 102. Similarly 1300 at Rs 101 and 2300 at Rs 100.

On sell side, there will be 100 quantities available to be sold at Rs 102 and 600 at Rs 103, 900 at Rs 104 and 1150 at Rs 105.

Now let us add one more column into the above table, “Trade-able Quantities”

PriceBuyerBuy Order QuantityTotal Buy Order QuantityTrade-able QuantitiesTotal Sell Order QuantitySell Order QuantitySeller
1051150250Trader H
104900300Trader G
103Trader A200200200600500Trader F
102Trader B700900100100100Trader E
101Trader C4001300
100Trader D10002300

At Rs 102, even though there are orders to buy 900 quantities, sellers are ready to sell only 100 quantities.

At Rs 103, even though sellers are ready to sell 600 shares, buyers are interested in only 200 quantities. There is no others prices where any orders can be matched. 

Now the equilibrium price is the price at which maximum orders can be matched. Since at Rs 103, 200 quantities can be matched which is greater than the 100 quantities at Rs 102, Rs 103 is considered as opening price of the day.

PriceBuyerBuy Order QuantityTotal Buy Order QuantityTrade-able QuantitiesTotal Sell Order QuantitySell Order QuantitySeller
1051150250Trader H
104900300Trader G
103Trader A200200200600500Trader F
102Trader B700900100100100Trader E
101Trader C4001300
100Trader D10002300

  Consideration for various scenarios

The above is overly simplified for the sake of understanding. But the opening price discovery algorithm executed by exchanges are very complex and designed to handle various special scenarios.

Scenario 1 : Two matching maximum trade-able quantity for different share prices

Consider the below scenario, there are two equal highest trade-able quantity for the prices at Rs 8020 and Rs 8025.

PriceBuy Order QuantityTotal Buy Order QuantityTrade-able QuantitiesTotal Sell Order QuantitySell Order QuantityUnMatched Quantities
803525025025021502501900
803060085085019003501050
8025200105010501550500500
8020600165010501050200600
801535020008508507501150
800030023001001001002200

In these kind of scenario, the price at which minimum number of unmatched quantities (quantities left over after matching the trade-able quantities) are present is considered as equilibrium price.

In the above example the unmatched quantities at Rs 8020 (600) is more than at rs 8025 (500). Hence Rs 8020 is considered are the equilibrium price.

Scenario 2 : Two matching maximum trade-able quantity for different share prices and same unmatched quantities too!

Consider this scenario, now the unmatched quantities are also same.

PriceBuy Order QuantityTotal Buy Order QuantityTrade-able QuantitiesTotal Sell Order QuantitySell Order QuantityUnMatched Quantities
803525025025022502502000
803060085085020003501150
8025300115011501650500500
8020500165011501150300500
801535020008508507501150
800030023001001001002200

In this case, the previous days closing price is involved and the price which is closer to closing price will be equilibrium price. Suppose the the previous day’s close is Rs 8000, then as the price 8020 is closer to 8000 than 8025, it is considered as equilibrium price

Scenario 3 : Two matching maximum trade-able quantities with same unmatched quantities and share price are equally distanced from previous closing price!!

In the above example, suppose the closing price was Rs 8022.5, then both Rs 8020 and Rs 8025 are at equal distant from the closing price. In these kind of scenarios, the closing price (Rs 8022.5) itself is considered as equilibrium price

  Important Points to remember about Pre-Open Session

Below are some of the important points to be remembered about pre-open market session

  • Pre-Open session is  not available in Futures & Options Segment (F&O)
  • Pre-Open market orders can be placed in the scrips of NIFTY & Sensex indices (Subject to Change)
  • Pre-Open orders can be placed in Cash/Margin/Intraday segments
  • Orders cannot be placed beyond +20% of previous day’s closing price
  • All the limit orders that are not traded during the Pre-Open market are normal trading session at the same price
  • Market Orders that are not traded during Pre-Open session will be moved to normal trading session at opening Price.
  • If Opening Price is not discovered during Pre-Open session, then the market orders will be shifted to Normal trading session at Previous Day Closing Price.

Read : Top 10 Cheap and Best Discount Stock Brokers of India 

Also Read : What is a Demat Account and What is the Procedure to open it online?


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