Hello Matt, some time ago I asked how the End Of Day settlement process works. Thank you for that. Can you please tell me how the Pre-Market works. I see on my screen the matching bids altering up and down on the pre-open. I would like to know if my initial bid will fill at the open or do I have to re-adjust my bid as the price changes in order to get filled on the open. Kind Regards Robert.
Response
The Australian Stock Exchange is in pre-open phase from 7.00am to 10.00am. Between 10.00am and 10.09am the stocks open in five groups arranged in alphabetical order. For example, the first group of shares whose stock codes start with A or B open at approximately 10.00am through to the last group of shares whose stock codes begin with letters between S and Z, who open at approximately 10.09am.
During pre-open and the opening phases you can place new orders and amend or cancel existing orders right up until the stock opens. The opening price is determined by auction, similar to that which takes place at the end of day to determine the closing price. Where bids and offers overlap, the opening price will be the volume weighted average price of those overlapping shares. Because new orders can be placed and existing orders amended or cancelled right up until open, the opening price is subject to change, so if you are wanting to buy on the open you will need to review and change your order if needed.
Keep in mind that if you are buying shares and your bid price is above the opening price, then you will in fact buy the shares at the lower opening price. For example, if you have a bid in for company XZY at $1.01 and it opens at $1.00, then your order will trade at $1.00. On the sell side, if you have a sell order in company XYC at .99c and it opens at $1.00, then your order will have traded at the opening price of $1.00.
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If your order is in the market at the opening price however, then you need to be aware that it may not trade in full or at all. Dependant on whether or not there is enough volume to fulfil your order, using our example, if you have a bid in for 10,000 XYZ shares at $1.00 but there are 100,000 shares ahead of your order in the queue at or above your bid price of $1.00 and only 50,000 shares trade on the open at that price, then your order will not have traded, it would still be in the queue.
Where there is no overlapping market, the opening price is determined when either the bid or offer is met, during market open hours.
By Matt Comyn, General Manager, CommSec
Important Information
The views expressed in this article are those of Matt Comyn, a representative of Commonwealth Securities Limited (CommSec) ABN 60 067 254 399 AFSL 238814. Commonwealth Securities Limited (CommSec) ABN 60 067 254 399 AFSL 238814 is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 and a Participant of the ASX Group and the Sydney Futures Exchange. As this information has been prepared without considering your objectives, financial situation or needs, you should, before acting on this information, consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice.
Other articles in this week’s newsletter
Portfolio Watch – an energy stock portfolio for resources enthusiasts
Jesse Livermore: Lessons From A Legendary Trader
How to fill your bid at market open
6 Financial Moves That Sound Good – But Aren’t
Stocks and Stats to watch out for this week
