From Monday (18th October), both exchanges will have a pre-open call session.

The pre-open session will be conducted only for the Nifty/Sensex stocks.

This is how it will work:

Orders will be collected from 9:00 AM to 9:07 AM-9:08 AM.

(Order collection will be stopped randomly between 9:07 AM and 9:08 AM).

Till 9:12 AM, order matching will be done.

Normal trading will start from 9:15 AM.

Equilibrium price (opening price) will be the price at which maximum quantity can be matched.

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e.g.

Suppose we want the matchable quantity at 900.

For calculating matchable quantity at 900, all buy orders at and above 900 will be considered while matching orders.

Similarly, for calculating matchable quantity at 900, all sell orders at and below 900 will be considered while matching orders.

As stated earlier, equilibrium price (opening price) will be the price at which maximum quantity can be matched.

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If there is more than one price point with same match-able quantity, then the Indicative equilibrium price will be the price at which the imbalance quantity is minimum.

The process may seem a bit complicated, but if one reads a few times, it will be clear. .

Download this pdf file from NSE's site.

http://nseindia.com/content/press/Pr...ctober2010.pdf

The illustration will be helpful in understanding the process.

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I also read that more scrips will be added to the list. I think the aim is to cover all scrips under this mechanism.

Having a hard time downloading the pdf. First question I have:

What will happen to the orders other than the equilibrium ones? Will they be canceled or placed on the exchange like regular orders?

Did you use the "Save As" option or did you try to open it in your browser?

Using "Save As" option is always better.

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Once an equilibrium price is discovered, the system will try to trade all buy orders at and above the equilibrium price and all sell orders at and below the equilibrium price.

The system will first try to match limit orders with other limit orders.

Then, the system will try to match limit orders with market orders.

Then, the system will try to match market orders with other market orders.

Some limit orders (at equilibrium price) and market orders may not find a match.

The limit orders will be carried to normal market without modification.

Market orders too will be converted to limit orders at equilibrium price and carried to the normal market.

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What are the pros and cons of this new process?

Is it to remove the first minute huge-up-down transaction?

The aim is to remove volatility from opening trades and also to eliminate stray trades.

This process will allow investors to gauge the supply and demand before they decide to make the finalize their orders.

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So does this mean that anyone can place an order during the first 7 minutes and then when the market opens at 9:15, the orders will be be there in the order book? I tried placing an order for Delta Corp but got the message that trading is not allowed at this time.

How exactly does this benefit us? We come to know at what price the market is going to open?

See post #1.

The pre-open session is only for Nifty/Sensex stocks.

For other stocks, market opens at 9:15 AM.

The pre-open session is used to determine the opening prices of Nifty/Sensex stocks only.

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Is the open price for non Nifty / Sensex stocks decided in the same way, by finding the equilibrium price, or is it some operator who decides at what price to open the stock?

Are they going to introduce the pre-open for other stocks as well? Anyone has any idea if the other stock markets of the world have a similar system for all stocks?

For other stocks, the first trade after 9:15 AM is the opening price.

The first trade happens as soon as a buy and a sell order are matched. The first order matching can happen at any price and the orders can be from anyone - institutions, operators, HNIs or retail investors.

I don't think pre-opening session will be introduced for other stocks in the near future.

As of now, the pre-opening market is still not very liquid and for many stocks the opening rates don't last for more than a few seconds. This shows that there is very limited participation in the pre-open session.

Introducing a pre-open session for less liquid stocks doesn't make sense unless there is active participation from all categories of market participants.

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