FAQ in relation to Pre-opening Session
Last updated: 17 May 2016
1.
What is the Pre-opening Session?
The Pre-opening Session is an additional trading session of 30 minutes which
takes place before the Morning Trading Session. It allows orders to be entered
into the trading system, AMS/3, for a single price auction, and transactions
concluded before the commencement of the Morning Trading Session to be
reported by Exchange Participants.
The Pre-opening Session consists of an order input period, a pre-order matching
period, an order matching period and a blocking period as follows:
Order Input Period
Pre-order Matching Period
Order Matching Period
Blocking Period
From
7 March 2011 onwards
From 9:00 a.m.
to 9:15 a.m.
From 9:15 a.m.
to 9:20 a.m.
From 9:20 a.m.
to 9:28 a.m.
From 9:28 a.m.
to 9:30 a.m.
During the order input period, only at-auction orders and at-auction limit orders
are accepted. Orders are accumulated and updated in AMS/3 continuously and
may be modified or cancelled. Input of pre-open trades is allowed during this
period.
During the pre-order matching period, only at-auction orders are accepted and
modification or cancellation of orders in AMS/3 will not take place. It can avoid
significant changes in the Indicative Equilibrium Price (IEP) and adjust the IEP to
a fair market price. Input of pre-open trades is allowed during this period.
During the order matching period, no input, modification and cancellation of
orders are allowed. Orders will be matched in order type (at-auction order first),
price and time priority at the final IEP. No input of pre-open trades is accepted
during this period.
During the blocking period, no order and trade activities are allowed. It is a
break between the Pre-opening Session and the Morning Trading Session.
The information of the trades concluded by AMS/3 during the order matching
period will be disseminated to Exchange Participants and information vendors.
2.
What are the purposes of a Pre-opening Session?
The Pre-opening Session determines a fair opening price of each security and
reduces the loading of the System from the large number of order inputs and trade
execution messages at the commencement of the Morning Trading Session. It also
helps to reduce the workload of Exchange Participants at the commencement of
the Morning Trading Session and increases their operational efficiency.
3.
What kind of orders can be entered during the Pre-opening Session?
During the order input period of the Pre-opening Session, only at-auction orders
and at-auction limit orders are accepted. During the pre-order matching period of
the Pre-opening Session, only at-auction orders are accepted.
An at-auction order is a market order without a specified price. It enjoys a higher
order matching priority than an at-auction limit order. It will be cancelled
automatically after order matching. Investors who place at-auction orders should
note that the final traded price (i.e. final IEP) is not known at the time of order
input and may not fall within their expected price range.
An at-auction limit order is a limit order with a specified price. After order
matching in the Pre-opening Session, unfilled at-auction limit orders with input
price not deviating 9 times or more from the nominal price will be converted to
limit orders and carried forward to the Morning Trading Session.
4.
Will the limit orders / enhanced limit orders / special limit orders be rejected
by the System during the Pre-opening Session?
In general, the AMS/3 Host will only accept at-auction orders and at-auction limit
orders during the Pre-opening Session. Limit orders / enhanced limit orders /
special limit orders entered to the AMS/3 Host during this session will be rejected.
As BSS trading device is developed by the Exchange Participant, the treatment of
limit orders / enhanced limit orders / special limit orders entered through
BSS during the Pre-opening Session will depend on the system design of the
BSS, which is based on the Exchange Participant's operational needs.
5.
Can pre-open trades still be reported during the Morning Trading Session?
Exchange Participants are allowed to report the pre-open trades within the first 15
minutes of the Morning Trading Session.
The Pre-opening Session is an additional period for reporting pre-open trades.
The market turnover calculated during the order input and the pre-order matching
period stems from the reporting of pre-open trades. Pre-open trades are concluded
before the commencement of continuous trading session, including those
concluded but not recorded in AMS/3 on the previous trading day.
6.
What are Indicative Equilibrium Price (IEP) and Indicative Equilibrium
Volume (IEV)? How are they determined?
An IEP is calculated during the Pre-opening Session and serves as the market
opening price for the corresponding security. An IEP will only be calculated if the
highest bid price of the buy at-auction limit orders is equal to or higher than the
lowest ask price of the sell at-auction limit orders. If more than one price satisfies
this criterion, the IEP shall be calculated according to the following rules:
(i)
the IEP shall be one of the bid prices or ask prices which falls within the
range of the highest bid price of the buy at-auction limit orders and the lowest
ask price of the sell at-auction limit orders (inclusive of both prices) at which
the aggregate size of the trades to be concluded based on the methodology
specified in the Rules of the Exchange is maximised;
(ii) if more than one price satisfies this rule , the IEP will be the price at which
the normal order imbalance is the lowest. For these purposes, normal order
imbalance is defined as the difference between the aggregate size of the buy
at-auction orders and the buy at-auction limit orders with bid prices at or
better than certain price and the aggregate size of the sell at-auction orders
and the sell at-auction limit orders with ask prices at or better than the same
price;
(iii) if more than one price satisfies this rule, the IEP shall be(a) the highest of such prices if in relation to each and every of such prices,
the aggregate size of the buy at-auction orders and the buy at-auction limit
orders with bid prices at or better than that price is greater than the
aggregate size of the sell at-auction orders and the sell at-auction limit
orders with ask prices at or better than that price; or
(b) the lowest of such prices if in relation to each and every of such prices, the
aggregate size of the buy at-auction orders and the buy at-auction limit
orders with bid prices at or better than that price is smaller than the
aggregate size of the sell at-auction orders and the sell at-auction limit
orders with ask prices at or better than that price;
(iv) if more than one price satisfies this rule, the IEP will be the price closest to
the previous closing price. If two prices are equidistant from the previous
closing price, the IEP will be the higher of the two prices. However, if the
previous closing price is not available, the IEP shall be the highest of these
prices.
If no IEP is calculated, no order will be matched during the order matching period
of the Pre-opening Session. This can occur when there are only at-auction orders
on both sides, or only at-auction limit orders on one side and at-auction orders on
the other side, or at-auction limit orders on both sides but the highest bid price of
the buy at-auction limit orders is lower than the lowest ask price of the sell
at-auction limit orders.
IEV is the number of shares that can be matched at the IEP.
7.
Are there any examples for IEP calculation and order matching mechanism
for the Pre-opening Session?
Following examples illustrates the calculation of IEP and order matching
mechanism during the Pre-opening Session.
Example 1
The table below shows all orders in the order book at the commencement of order
matching period, sorted in the sequence of matching priority:
BID
ASK
Broker Time
Volume Price
Price
Volume Time
A
09:05
2,000 At-auction 31.90
2,000
09:01
B
09:00
1,000
32.00
31.90
8,000
09:10
C
09:11
8,000
32.00
32.00
10,000
09:05
D
09:02
6,000
31.90
32.00
4,000
09:13
E
09:10
3,000
31.90
32.00
2,000
09:14
F
09:14
2,000
31.90
32.10
6,000
09:12
G
09:13
2,000
31.80
32.10
2,000
09:13
32.20
4,000
09:01
32.20
2,000
09:08
32.20
1,000
09:12
Broker
P
Q
M
N
O
K
L
H
I
J
In general, the IEP shall be one of the bid prices or ask prices which falls at or
within the range of the Highest Bid Price and the Lowest Ask Price and results in
maximum matched shares. Therefore, the IEP is determined to be $32.00.
Possible IEP
Acc. Bid Qty
Acc. Ask Qty
Matched Shares
32.00
11,000
26,000
11,000
31.90
22,000
10,000
10,000
During the order matching period, the following trades are generated.
Buying Broker
Trades Generated
Selling Broker
A
2,000@32.00
P
B
1,000@32.00
Q
C
7,000@32.00
Q
C
1,000@32.00
M
After completion of order matching, the following unfilled at-auction limit orders
would be carried forward to the Continuous Trading Session.
BID
ASK
Broker
Time Volume Price
Price Volume Time
Broker
D
09:02
6,000
31.90
32.00
9,000
09:05
M
E
09:10
3,000
31.90
32.00
4,000
09:13
N
F
09:14
2,000
31.90
32.00
2,000
09:14
O
G
09:13
2,000
31.80
32.10
32.10
32.20
32.20
32.20
6,000
2,000
4,000
2,000
1,000
09:12
09:13
09:01
09:08
09:12
K
L
H
I
J
Example 2
Assuming that the following orders are entered during the Order Input Period:
BID
ASK
Broker
Time
Volume
Price
Broker
Time
Volume
Price
A
09:06
1,000
64.25
D
09:09
2,000
63.75
B
09:02
5,000
64
E
09:08
3,000
64
C
09:12
2,000
63.75
F
09:03
2,000
64.25
G
09:10
2,000
64.25
The IEP is calculated to be $64 and the cumulative available quantities at the bid
and ask sides at $64 are 6,000 and 5,000 shares respectively.
Possible IEP
Acc. Bid Qty
Acc. Ask Qty
64.25
1,000
9,000
64
6,000
5,000
63.75
8,000
2,000
Matched Shares
1,000
5,000
2,000
A broker, who wants to match the surplus at IEP or is of the view that the IEP is on
the high side can enter an ask at-auction order of 1,000 shares or more. Assuming
Broker H enters an ask at-auction order of 5,000 shares during the Pre-order
Matching Period and the order book is as follow:
BID
ASK
Broker Time Volume Price Broker Time Volume
Price
A
09:06
1,000
64.25
H
09:16
5,000 at-auction
order
B
09:02
5,000
64
D
09:09
2,000
63.75
C
09:12
2,000
63.75
E
09:08
3,000
64
F
09:03
2,000
64.25
G
09:40
2,000
64.25
The IEP is now changed from $64 to $63.75 but the number of tradable shares is
increased from 5,000 to 7,000.
Possible IEP
Acc. Bid Qty
64.25
1,000
64
6,000
63.75
8,000
Acc. Ask Qty
14,000
10,000
7,000
Matched Shares
1,000
6,000
7,000
If another broker I is of the view that the IEP is low and enters a bid at-auction
order of 10,000 shares. The order book is as follow:
Broker
I
A
B
C
BID
Time Volume
09:18 10,000
09:06
09:02
09:12
1,000
5,000
2,000
Price
Broker
at
H
auction
order
64.25
D
64
E
63.75
F
G
ASK
Time Volume
Price
09:16
5,000 at-auction
order
09:09
09:08
09:03
09:10
2,000
3,000
2,000
2,000
63.75
64
64.25
64.25
The IEP is changed from $63.75 to $64.25 and the number of tradable shares is
further increased to 11,000. Since only at-auction order can be entered and no
modification or cancellation of orders is allowed during the pre-order matching
period, it can avoid significant change in the IEP.
Possible IEP
Acc. Bid Qty
Acc. Ask Qty
64.25
11,000
14,000
64
16,000
10,000
63.75
18,000
7,000
8.
Matched Shares
11,000
10,000
7,000
Will the information of IEP and IEV be disseminated during the Pre-opening
Session?
Both IEP and IEV will be disseminated to Exchange Participants and information
vendors during the Pre-opening Session.
9.
What are the purposes of only allowing input of at-auction order during the
pre-order matching period of the Pre-opening Session?
During the pre-order matching period, order cancellation and modification are not
allowed.
This avoids significant change in the IEP by removing orders
immediately before the commencement of the order matching period. It also
provides a mechanism to adjust the IEP to a fair market price while attracting more
at-auction orders input during this period.
10. What are the differences in the trading mechanism of Pre-opening Session
and that of the Continuous Trading Session?
During the Continuous Trading Session, orders will be matched continuously and
automatically by AMS/3 when the specified prices of buy orders and sell orders
match. Only limit orders, enhanced limit orders and special limit orders will be
accepted during this period.
During the Pre-opening Session, order input and order matching will be organised
into two distinct processes:(1)
During the order input period of the Pre-opening Session, only at-auction
orders and at-auction limit orders will be accepted and during the pre-order
matching period of the Pre-opening Session, only at-auction orders will be
accepted. These orders will be accumulated and updated but no matching
will occur during these periods.
(2) During the order matching period of the Pre-opening Session, orders
accumulated during the order input period and the pre-order matching period
of the Pre-opening Session will be matched in order type (at-auction orders
carry a higher matching priority), price and time priority, at the final IEP.
11. What are the differences for information disseminated during the
Pre-opening Session and the Continuous Trading Session?
The information disseminated during the Pre-opening Session and the Continuous
Trading Session is basically the same, except for the following:
•
Nominal price
During the Pre-opening Session, the nominal price of an issue of securities will
be equal to the IEP (if the IEP is available) or the previous closing price (if the
IEP is not available) of the issue. During the Continuous Trading Session, the
nominal price of a security determined by comparing the current bid price,
current ask price and last recorded price / previous closing price, as the case
may be of the security.
•
Best bid /ask prices
During the Pre-opening Session, the best bid price and best ask price means
the IEP or, if the IEP is not available, the most competitive prices on the
corresponding side (i.e. buying or selling).
During the Continuous Trading Session, the best bid price means the highest
bid price and the best ask price means the lowest ask price.
•
Primary queue
During the Pre-opening Session, the primary queue means the queue of
at-auction orders and at-auction limit orders with a specified price at or more
competitive than the IEP. In case of buying, the specified price equals or is
higher than the IEP; and in case of selling, the specified price equals or is
lower than the IEP. If the IEP is unavailable, the primary queue is the queue of
at-auction limit orders with the most competitive specified price, in the case of
buying, the best bid price, and in case of selling, the best ask price.
During the Continuous Trading Session, the primary queue is the queue of
orders with the most competitive specified price, the best bid price for buying,
or in case of selling, the best ask price.
12. Will the Morning Trading Session commence if no IEP is determined in the
Pre-opening Session?
The Pre-opening Session is an additional trading session which serves to
determine a fair opening price of each security and reduce the loading of the
System from the large number of order inputs and trade execution messages at the
commencement of the Morning Trading Session. However, it is not a prerequisite
for the commencement of the Morning Trading Session which will start as usual
even if there is no IEP.
13. If, for whatever reason, the trading cannot commence at 9:00 a.m., will there
be any Pre-opening Session on that day?
No, the Pre-opening Session will at 9:00 am or be cancelled. If there is no
Pre-opening Session, Continuous Trading will commence as usual.
14. If only a Pre-opening Session takes place , will that day be counted as a
trading day?
Yes, it will be counted as a trading day even if there is only a Pre-opening Session
but no Continuous Trading Session.
15. Is short selling permitted during the Pre-opening Session?
Short selling will not initially be allowed during the Pre-opening Session. It will
be subject to market response and further review.