Equilibrium Price Discovery:
The equilibrium price computation should follow the same volume maximization logic based on aggregated demand & supply of orders, which is currently followed for the existing pre-open session. All orders entered in the system should match at the same price, i.e. the equilibrium price, if they qualify as match-able.
Opening price determination logic for IPO's and Relisted Securities
The following steps illustrate the detailed process to calculate the opening price.
Step 1: Sorting and Aggregating Orders at Different Price Points
All limit orders in the order book will be organized in the following manner:
Consider the limit order price points at and within the range of the highest buy price and lowest sell price. Arrange the limit order price points in descending order.
Calculate the cumulative buy and sell quantity at each price point. Cumulative buy quantity shall increase or remain constant as the price decreases. Cumulative sell quantity shall decrease or remain constant as the price decreases.
NOTE :- Cumulative market buy and sell orders will be added to each of the cumulative buy and sell quantities at available price points.
Step 2: Determining the Maximum Tradable Quantity
The tradable quantity at an eligible price point is the minimum of the cumulative buy quantity and cumulative sell quantity at that price point. The price point, at which the tradable quantity is maximum, is considered the opening price. If there is a single price point at which the quantity traded is maximum then that is the opening price.
If there are multiple price points with the same traded quantity, we proceed to the next step.
Step 3: Establishing Order Imbalance
The order imbalance is calculated as the difference between the cumulative buy quantity and cumulative sell quantity at each eligible price point. If there is a single volume maximizing price at which the absolute unfilled/unmatched quantity (order imbalance) is minimum that price is the opening price.
If there is multiple volume maximizing prices at which the order imbalance is minimum, then we proceed to the next step.
Step 4: Comparing with the close Price
To arrive at the final price we choose the potential price (obtained from the previous steps) which is closest to the close price. This single price point is chosen as final opening price at which all orders are executed. In case the close price is the mid value of a pair of prices which are closest to it, then the close price itself will be considered the market opening price.
Treatment of Unmatched orders
All unmatched limit orders in the special pre-open session will be shifted to the order book of the continuous trading session at their limit price on price-time priority basis, irrespective of whether the equilibrium price has been discovered or not.
In case the limit price of any unmatched order that is shifted to the continuous trading session is beyond the applicable price band for that Security, then such outstanding orders shall be returned to the respective member.
Unmatched orders entered with IOC will get rejected.
Equilibrium price discovered:
All unmatched orders entered during the pre-open (Call Auction) period shall be moved to the continuous trading session at their limit price.
Equilibrium price NOT discovered:
All orders will be CANCELLED by the system at the end of the special pre-open session.