Question

What is the duration of the pre-open session and what does it consist of?

Hint:

The 15-minute pre-open session allows better price discovery and smooth transition to regular trading.

Answer 1

The pre-open session is a preliminary trading phase conducted on the stock exchanges in India before the normal market opens. Its main objective is to reduce volatility and enable efficient price discovery.\par Duration: 15 minutes (from 9:00 a.m. to 9:15 a.m.)\par It consists of three distinct parts:

Order Entry Period (9:00 – 9:08 a.m.): Investors can place, modify, or cancel orders. No order matching occurs during this period.
Order Matching Period (9:08 – 9:12 a.m.): No new orders or modifications are allowed. The system matches buy and sell orders and determines the equilibrium price using a multilateral order matching system.
Buffer Period (9:12 – 9:15 a.m.): This period acts as a transition phase between the pre-open session and the regular market session. No investor activity is permitted.
This mechanism helps in reducing volatility that may be caused by large order imbalances or news-related sentiment.