Pre-Opening is the period at the opening of the stock market, when the price for each stock / security is established by determining the equilibrium price at which the maximum quantity can be executed.
In cases of a major event or announcement between the market trading hours, the stock prices can be highly volatile the next trading day as soon as the market opens. SEBI has introduced pre-open call auction to discover the right price and in turn bring stability.
While the regular Market Opens at 9.15 am, pre-opening session lasts for 15 minutes, from 9:00 to 9:15am. This pre-open session is divided into 3 parts.
- Order Entry period: Initial 8 minutes allow the investors to place/ modify/ cancel orders. On the basis of these orders, the exchange would determine the price at which the share will trade. No orders are accepted after the first 8 minutes.
- Order Matching period: Second phase is of 4 minutes. During these 4 minutes, orders are matched and all the trades are confirmed by the exchange. This helps to discover the price. Investor is not allowed to place/ modify/cancel orders.
- Buffer period: Last slot of 3 minutes is a buffer session for a smooth transitioning from pre-market session to a normal market session.
Orders which remain pending or unexecuted due to opening price not determinable during the pre-auction period are moved to the continuous session at the previous closing prices.