Securities and Exchange Board of India (SEBI) has issued a circular dated 15 July
2010 notifying the Introduction of Call Auction in the Pre-open Session. We present
herewith extracts from the SEBI circular providing a brief introduction to the concept
and the details of the proposed mechanism.
As per SEBI's Circular, to begin with, pre-open session shall be introduced on a pilot basis by BSE and
NSE for the scrips forming part of SENSEX and NIFTY. The list of scrips is given
as Annexure 'A'. In case of any change in the composition of SENSEX and NIFTY, pre-open
session shall be introduced for such incoming scrips. Pre-open session shall also
continue for the scrips moving out of SENSEX and NIFTY, though they will not be
reckoned for the computation of the index.
Session timings of Pre-open Session
- The pre-open session shall be for duration of 15 minutes i.e. from 9:00a.m. to 9:15
a.m., out of which 8 minutes shall be allowed for order entry, order modification
and order cancellation, 4 minutes for order matching and trade confirmation and
the remaining 3 minutes shall be the buffer period to facilitate the transition
from pre-open session to the normal market.
- The session shall close randomly during last one minute of order entry i.e. anytime
between 7th and 8th minute of the order entry. Such random closure shall be system
driven.
Type of Orders & Order Execution
- Limit orders and market orders shall be entered during the pre-open session and
both shall be reckoned for computation of equilibrium price.
- No iceberg order will be allowed i.e. orders shall be disclosed in full quantity.
- Pursuant to the discovery of price in the pre-open session, at the time of order
execution, limit orders shall be given priority over market orders. The sequence
for executing orders is given below:
- Eligible Limit orders shall be matched with eligible limit orders.
- Residual eligible limit orders shall be matched with market orders.
- Market orders to be matched with market orders.
Price discovery mechanism
- The equilibrium price shall be the price at which the maximum volume is executable.
In case more than one price meets the said criteria, the equilibrium price shall
be the price at which there is minimum order imbalance quantity (unmatched order
quantity). The absolute value of the minimum order imbalance quantity shall be taken
into consideration.
- Further, in case more than one price has same minimum order imbalance quantity,
the equilibrium price shall be the price closest to previous day's closing price.
In case the previous day's closing price is the mid-value of a pair of prices which
are closest to it, then the previous day's closing price itself shall be taken as
the equilibrium price. In case of corporate action, previous day's closing price
shall be the adjustable closing price or the base price.
Example
A scenario may arise, wherein; more than one price may have same minimum imbalance
quantity. Example on the same is given hereunder:
|
Price
|
Buy (Qty)
|
Cum. Buy Qty
|
Sell (Qty)
|
Cum. Sell
Qty
|
Unmatched
Quantity
|
Volume
tradable
|
|
106
|
-
|
0
|
3000
|
8000
|
8000
|
0
|
|
103
|
2000
|
2000
|
3000
|
5000
|
3000
|
2000
|
|
96
|
3000
|
5000
|
1000
|
2000
|
3000
|
2000
|
|
94
|
1500
|
6500
|
1000
|
1000
|
5500
|
1000
|
|
92
|
2000
|
8500
|
-
|
0
|
8500
|
0
|
|
90
|
1000
|
9500
|
-
|
0
|
9500
|
0
|
In the said example 103 and 96 are the prices wherein, the volume tradable and unmatched
quantity is the same. To derive the equilibrium price, the said prices i.e. 103
and 96 which is closest to the previous day's closing price shall be considered.
In case the previous day's closing price is 95, then, 96 may be considered as the
equilibrium price. In case the previous day's closing price is 105, then, 103 may
be considered as the equilibrium price. In case the previous day's closing price
is 99.5 which is the mid-value of 103 and 96, then the equilibrium price shall be
the previous day's closing price i.e. 99.5.
- In case of pending unmatched orders in pre-open session, they shall be shifted to
the order book of the normal market following time priority. Unmatched market orders
will shift to the normal market order book as limit orders at a price as discovered
in the pre-open session.
- If the price is not discovered in pre-open session then the orders entered in the
pre-open session will be shifted to the order book of the normal market following
time priority. The price of the first trade in the normal market shall be the opening
price.
Dissemination of information by the Exchange
- Price band of 20% shall be applicable on the securities during pre-open session.
- In case the index breaches the prescribed threshold limit upon the closure of pre-open
session, the procedure as prescribed in SEBI Circular Ref. No.SMDRPD/Policy/Cir-37
/2001 dated June 28, 2001 shall be applicable from the time continuous normal market
opens.
Risk Management System
The current risk management system for cash market shall be applicable to pre-open
session.
ANNEXURE A: LIST OF ELIGIBLE STOCKS FOR THE PRE-OPEN SESSION
|
Sr.No
|
Stocks
|
Sr.No
|
Stocks
|
|
1
|
ABB LTD.
|
26
|
LARSEN & TOUBRO LTD.
|
|
2
|
ACC LIMITED
|
27
|
MAHINDRA & MAHINDRA LTD
|
|
3
|
AMBUJA CEMENTS LTD
|
28
|
MARUTI SUZUKI INDIA LTD.
|
|
4
|
AXIS BANK LIMITED
|
29
|
NTPC LTD
|
|
5
|
BHARTI AIRTEL LIMITED
|
30
|
OIL AND NATURAL GAS CORP.
|
|
6
|
BHEL
|
31
|
PUNJAB NATIONAL BANK
|
|
7
|
BHARAT PETROLEUM CORP LTD
|
32
|
POWER GRID CORP. LTD.
|
|
8
|
CAIRN INDIA LIMITED
|
33
|
RANBAXY LABS LTD
|
|
9
|
CIPLA LTD
|
34
|
RELIANCE COMMUNICATIONS LTD.
|
|
10
|
DLF LIMITED
|
35
|
RELIANCE CAPITAL LTD
|
|
11
|
GAIL ( INDIA ) LTD
|
36
|
RELIANCE INDUSTRIES LTD
|
|
12
|
HCL TECHNOLOGIES LTD
|
37
|
RELIANCE INFRASTRUCTURE LTD
|
|
13
|
HDFC LTD
|
38
|
RELIANCE POWER LTD.
|
|
14
|
HDFC BANK LTD
|
39
|
STEEL AUTHORITY OF INDIA
|
|
15
|
HERO HONDA MOTORS LTD
|
40
|
STATE BANK OF INDIA
|
|
16
|
HINDALCO INDUSTRIES LTD
|
41
|
SIEMENS LTD
|
|
17
|
HINDUSTAN UNILEVER LTD.
|
42
|
STERLITE INDS ( IND ) LTD
|
|
18
|
ICICI BANK LTD.
|
43
|
SUN PHARMACEUTICALS IND.
|
|
19
|
IDEA CELLULAR LIMITED
|
44
|
SUZLON ENERGY LIMITED
|
|
20
|
INFRA. DEV. FIN. CO. LTD
|
45
|
TATA MOTORS LIMITED
|
|
21
|
INFOSYS TECHNOLOGIES LTD
|
46
|
TATA POWER CO LTD
|
|
22
|
ITC LTD
|
47
|
TATA STEEL LIMITED
|
|
23
|
JINDAL STEEL & POWER LTD
|
48
|
TATA CONSULTANCY SERV LTD.
|
|
24
|
JAIPRAKASH ASSOCIATES LTD
|
49
|
UNITECH LTD
|
|
25
|
KOTAK MAHINDRA BANK LTD
|
50
|
WIPRO LTD
|
|
