Understanding the ASX opening and closing auctions

Understanding the ASX opening and closing auctions

Unsurprisingly, many people get confused when it comes to the market trading periods that exist beyond the official ‘opening’ and closing’ times of the ASX (Australian Securities Exchange). Most of us are aware that the ASX ‘commences’ trading at 10:00am and ‘ceases’ trading at 4:00pm, but are baffled to learn that there are small windows on either side of these times during which one can enter buy or sell orders in the market. I'll run through these ASX market phases in an effort to alleviate some of the confusion surrounding this topic.

ASX Pre-open from 7am to 10am 

Between 7:00am – 10:00am AEST, we have what’s known as the ‘Pre-open’ market phase.

During this time, orders can be entered into the market but there is no trading going on.

Simply, buyers and sellers quote the different prices they are willing to accept (sellers) or pay (buyers) for their shares. At 10am (Open), when the market opens for trading, the overlapping bids and offers which exist within the market are matched off against each other.

The ASX algorithm to set the opening auction 

Basically, an algorithm is used to determine the volume on the buy side versus the volume on the sell side, as well as the prices at which they have been placed. This algorithm results in an official ‘auction’ price, which is the price at which the stock opens.

The algorithm is obviously only applied when an even or overlapping market exists, as when all buy orders are lower than all sell orders, there is yet to be an opening price; that will only occur when a buyer lifts their price to meet a seller, or a seller lowers their price to meet a buyer, at which point a trade is executed and an opening price is generated.

Matching ASX orders on the open 

So with an overlapping market, all buy orders that had been submitted above the auction price will have traded, just as all sell orders that had been submitted below the auction price will have traded.

Buy orders below the auction price and sell orders above the auction price will be sitting in the market still, not having yet traded at the prevailing market price.

Let’s use Telstra (TLS) as an example.

On the 22nd of March, 2017, Telstra closed at $4.55.

Between 7:00am – 10:00am AEST on the 23rd of March, you would be able to submit your buy or sell orders on TLS.

If a trader enters an order to buy 1000 TLS at $4.60, and the auction price ends up being $4.51, that trader will have purchased the stock at $4.51 on the opening auction.

However, if the trader had entered their order to buy 1000 TLS at $4.50, their order will still be sitting in the screen unfulfilled, trading 1c below the prevailing market price.

ASX staggered open times for all stocks 

At 10:00am AEST, the market opens for ‘Normal Trading’, but on a staggered basis.

By this, I mean all ASX stocks open alphabetically at set times. Here are the staggered ASX opening times:

  • Stock codes starting with A-B open at 10:00:00am (+/- 15 seconds);
  • Stock codes starting with C-F open at 10:02:15am (+/- 15 seconds); 
  • Stock codes starting with G-M at 10:04:30am (+/- 15 seconds);
  • Stock codes starting with N-R at 10:06:45am (+/- 15 seconds);
  • Stock codes starting with S-Z at 10:09:00am (+/- 15 seconds);

The market then trades as usual until 4:00pm.

AT 4pm, the market enters what is known as ‘Pre-CSPA’ (Closing Single Price Auction).

Between 4:00pm – 4:10pm, orders can be entered into the market and existing orders can be amended.

We have a similar situation to that of the Pre-Open phase. It’s handy to know of this period, as some investors I’ve spoken to just after 4pm, who are very keen to either buy or offload some shares that day, think it’s too late for them. And yet, they can still buy or sell if they get in by 4:10pm.

The final ASX closing time 

At 4:10pm, we have the Closing Single Price Auction, where the algorithm applies again to determine the closing auction price at which any overlapping orders are matched off against each other.

Other ASX market times to be aware of 

There are other market ‘phases’, such as ‘System Maintenance’ at 6:59pm – 7:00pm for example, but they are of no importance to traders. The market is effectively in ‘Close’ phase overnight, and it all starts again at 7:00am with the Pre-Open phase.

So in summary:

7am-10am:

Pre-Open

10am:

Open

10am-4pm:

Normal Trading

4pm-4:10pm

Pre-CSPA

4:10

Closing Single Price Auction

comments powered by Disqus

DISCLAIMER: Rivkin aims to provide clear and simple information to those visiting our website. If any part of this disclaimer does not make sense, please phone Rivkin and ask to speak with a member of our Dealing and Relationship Management Team. Rivkin provides general advice, securities and derivatives dealing services and accounting administration services. Rivkin does not provide advice that takes into account your, or anybody else's, investment objectives, financial situation or needs. We strongly suggest that you consult an independent, licenced financial advisor before acting upon any information contained on this website. Investing in and trading securities (such as shares listed on the ASX) and/or derivatives (such as Contracts for Difference or 'CFDs') carry financial risks. CFDs carry with them various additional risks that differ from more simple securities such as fully-paid company shares. Some of these risks include not owning the underlying instrument from which a price is being derived, settling trades 'over the counter' with a financial institution rather than on a stock exchange, and using leverage to gain access to trades that may have a higher face value than your initial deposit. This risk of leverage means that it is possible to lose more than your initial investment. Our aim is to create more life choices for our clients, which means improving the wealth of clients throughout many market cycles by nurturing a relationship spanning many years. If you are not comfortable with your understanding of the risks involved before using a Rivkin product and service, please contact our office to seek further information or a Product Disclosure Statement, or make an appointment to sit with one of our friendly financial experts. It is in our interest for your Rivkin experience to be a rewarding and comfortable one. Rivkin is a trading name of Rivkin Securities ABN 87123290602, which holds Australian Financial Services Licence No. 332 802.