Market Session If you are a regular trader or investor in the stock market, you may have heard about the term pre-opening market session in the NSE. The pre-opening session is one of the important concepts of the Indian stock markets. It is very important that you know this concept when you are an investor or trader in the stock market. In this blog, you will learn about the process of the pre-open market session in NSE. Let us begin by learning the meaning of the Pre-Opening session.
What is the Pre-Opening Session?
The concept of pre-opening session aims at reducing the volatility in the share prices during the opening of the stock market. The pre-market opening begins at 9 a.m. and ends at 9.30 a.m. The first eight minutes i.e. between 9:00 a.m. and 9:08 a.m. of the pre-market session is for collecting, modifying or canceling the orders. This time is for placing the market orders or limit orders. You cannot place new orders from 9.08 a.m. to 9.15 a.m. From 9.08 a.m. to 9.15 a.m. the orders that are already placed are matched and trade confirmation is done. To put in simple words, you can place orders only in the equity segment in the first 8 minutes of the market. Let us now learn why the pre-open market session is important in NSE India.
Why the Pre-Market Session Is Important?
The pre-market session is important during events that can lead to high volatility when the market opens. Like for example, any announcement or major event occurs before the market opens and its impact can bring heavy volatility when the market opens. During such situations, the pre-market session helps in overcoming the volatility. Special corporate events like merger and acquisitions, open offer, debt restructuring, delisting, the downgrade by credit rating agencies, etc. can lead to volatility and have a great impact on the wealth of investors. The pre-market session stables the market and helps in finding the right price by reducing the volatility.
Breakdown of 15 Minutes of Pre-Open Session
First 8 minutes (9 a.m. – 9.08 a.m.)
The first 8 minutes are for order collection. During this time, limit orders and market orders can be placed. Market orders are those orders in which there is a specified price for buying or selling the specific quantity of shares. In the market orders, the orders execute at the prevailing market price of the stock. In the case of limit orders, the price is specified for buying or selling the shares. The order execution happens only if that particular price is available in the market. In the first 8 minutes, modification and cancellation of orders can be done.
Next 4 minutes (9.08 a.m. – 9.12 a.m.)
During this period order confirmation and order matching are done. In this time period, the price identification of the stock is done using the equilibrium price or the call auction method. No modification, order addition or cancellation can be done during this time.
Next 3 minutes (9.12 a.m. – 9.15 a.m.)
The last 3 minutes of the pre-open market session is a buffer period. This time facilitates the transition from pre-open to regular trading session.
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Points To Remember Regarding Pre-Open Session
- After the price determination is done through the equilibrium price or call-auction price method, the market order execution is done at the equilibrium price and the orders that are not executed are carried forward to the open market as it is.
- A 20% price band limit is applicable to all the securities in the pre-market opening session in NSE.