After making changes to the closing session methodology, the National Stock Exchange (NSE) is now set to revise its order-entry rules for the equity market’s pre-open session from September 7. While the overall 15-minute pre-open period will remain unchanged, the rules governing when traders can place markets and limit orders will change.The revised arrangement makes the pre-open process more similar to the auction mechanism followed during the Closing Auction Session (CAS). NSE said the objective is to bring the mechanism used for determining the market opening closer to the framework already followed for the closing auction.The pre-open session will continue to operate between 9 AM and 9:15 AM. However, the order-entry period from 9 AM to 9:10 AM will now be divided into two five-minute windows.Between 9 AM and 9:05 AM, traders will be allowed to submit, modify or cancel both market and limit orders. Once this window ends, the rules will change. From 9:05 AM to 9:10 AM, NSE will accept only limit orders, meaning any market order submitted during this five-minute period will be rejected.The revision is particularly relevant for traders who tend to place orders towards the end of the pre-open session. Under the new arrangement, a market order cannot be entered after 9:05 AM. Traders wanting to place an order during the 9:05 AM to 9:10 AM window will therefore have to specify the price by using a limit order.
How will the new pre-open session work?
The first order-entry window will run from 9 AM to 9:05 AM. Investors will be able to enter new orders and modify or cancel existing orders during this period, with both market and limit orders permitted, according to an ET report.The second window will begin at 9:05 AM and end at 9:10 AM. Only limit orders can be entered during these five minutes. NSE has also stipulated that this phase can close randomly during its final two minutes.Once order entry ends, the exchange will carry out order matching between 9:10 AM and 9:12 AM. This will be followed by a three-minute transition period from 9:12 AM to 9:15 AM, after which the regular market session will begin.There is no change to the start of normal trading. The equity market will continue to open at 9:15 AM. The revision applies only to the rules governing order entry during the pre-open auction.
What changes for traders
A market order instructs the exchange to execute a buy or sell transaction at the best price available at that time. While such orders are straightforward to place, the actual price at which the trade is completed is not known in advance. This uncertainty can be more pronounced when the market opens with a significant gap or when a stock is experiencing high volatility.Limit orders offer greater control over the price. A buyer using this type of order specifies the highest price they are prepared to pay, while a seller sets the lowest price they are willing to accept.With the revised system, traders entering orders between 9:05 AM and 9:10 AM will have to opt for limit orders. The change could help lower the possibility of abrupt price distortions resulting from market orders being placed late in the pre-open period.NSE has also specified the sequence in which orders will be matched under the revised pre-open mechanism.Market orders that can be matched with other market orders will receive the first priority, with orders being considered according to time priority. Once these trades are accounted for, any market orders that remain will be matched against limit orders based on price-time priority.The final matching stage will involve the limit orders that are still pending. These will be matched with other limit orders using the same price-time priority mechanism.(Disclaimer: Recommendations and views on the stock market, or any other asset classes or personal finance management tips given by experts and analysts are their own. These opinions do not represent the views of The Times of India.)