This topic should be read in conjunction with the following sections
section 16 - the pre-open (a), what it is, purpose and function.
section 23 - the pre-open (b), practical application, how it can be used.
section 24 - electronic algorithms, used by the market maker.
section 28 - the market-maker controls the pre-open session and sets open price.
the pre-market session is a preview of the day session
The open price is the most important price of the day.
What happens during the day is determined by the "open".
The pre-market sessions of both the SFE and the ASX are related. The open price, established by the pre-open auction, outlined below, is the most important price of the day. A research paper by University of Sydney discusses how the market-maker, operating in the capacity of "specialist", can observe the order book prior to setting the opening price, obtaining monopoly profits that are not possible during the rest of the day. What happens during the rest of the day is determined by the location of "open price", and how the "open price" is established.
AM Pre-Open Phase:
Commences at 07:00 am and continues until 10:00 am.
Securities are not traded on ASX during the Pre-Open phase
Limit Orders can be entered and withdrawn at any time during the pre-open phase.
Bid and Offer prices can overlap in the Market Depth.
The area of overlap is called "the match area"
Bids and offers within the match area will participate in the open auction.
The ASX algorithm calculates a weigthed "auction" price based on the quantities on each side.
As orders are entered and withdrawn, progress auction prices are calculated and displayed.
AM Opening Phase:
Commences at 10.00 am taking 10 minutes to complete.
Securities open in 5 groups in alphabetical order.
At the commencement of the opening phase, orders in the order book, in the match area, are transacted.
All "matched" orders transact at the same Auction Price.
The Final Auction Price becomes the Opening Price for the security.
PM Closing Phase:
known as the cspa - closing single price auction, this period covers the following three phases:
Pre-Open Prior to Closing Phase:
Commences 04.00 pm. Concludes 04.09.59 pm.
Securities are not traded during the Pre-Open Prior to Closing Phase
Same process as the AM Pre-Open Phase.
Closing Price Auction:
Conducted at 04.10 pm.
Same algorithm auction price process as in AM phase above
All matching orders are transacted at the same Single Closing Price.
Closing Phase:
Commences 4.10.00.
Same process as the AM Opening Phase.
The Closing Auction Match is completed in 1 minute at 4:10.59 pm
SFE pre-market pre-open 9:40 am - 9:49 am
The day-time pre-open session begins at 09:40:00 am and concludes at 09:49:30 am.
The algorithm match procedures are the same as ASX above. Same match area.
During this period, traders who wish to, can enter orders "buy on open" or "sell on open"
It can also be o/s hedge funds who accumulate previous day, and "close on open" next day.
As orders are entered and withdrawn, the progress auction price is calculated and displayed.
The match-off occurs at 09:49:30 am. Trading begins 30 seconds later at 09:50:00 am.
The SFE auction is influenced by the cumulative effect of the ASX pre-open match.
how open price is calculated
during the pre-open period orders are entered into the order book
As orders are entered into the order-book (during the pre-open phase), the exchange continuously re-calculates the match price using simple weighted-average-volume formula applying "FIFO" principles.
when the security opens the last match price becomes the open price.
examples below present 3 alternate scenarios at one moment in time
the sell price is lower than the buy price
the prices are the same
the only differences are the quantities.
only orders at prices between 4000 and 3000 will participate in the match-off.
bid qty
bid price
ask qty
ask price
match price
a
100
4000
800
3000
3000
b
400
4000
400
3000
3500
c
800
4000
100
3000
4000
asx - example of pre-open status of selected stocks at 09:47 am
asx - example of pre-open status of selected stocks at 09:17 am on day of expiry of options, lepos, futures
match price
mechanics of the sfe pre-open auction.
AOP = anticipated open price = match price.
The pre-open auction period starts at 09:40:00 and concludes at 09:49:30
In the days of "floor" trading, buy and sell offers started far apart, and "auctioned" inward towards one another until they met in the middle, or one side capitulated. Trading began only when prices met. The "auction" process could be observed on "quote" screens, giving a sense of the initial market sentiment. Since October 1999, the electronic system changed this. Orders placed thru SFE Sycom Terminals from 9:40am onward, are queued electronically. Buy and sell offers start apart in the normal way with a positive spread, move inward toward one another, crossover, then move apart with a negative spread. Price inversion. Buyers above the offer, sellers below the bid. Wide spreads can occur. Sellers wishing to ensure they are filled on the open, place their order lower than the previous lowest offer. Buy orders are placed higher than the previous highest bid. A standard formula calculates the AOP for all orders inside the match. Broker terminals continuously display the AOP which is re-calculated every time a new order is entered inside the match. Traders can contact their broker at any time during the 10 minute pre-open session and obtain the AOP. This price can alter rapidly during this period, based on the placement of orders. If each new order is placed at the front of the queue, whether on the buy or sell side, the expansion of the spread, or rise in order numbers at each extreme can be observed. It doesn't happen that way. That would be too easy. If a LARGE "participant" wants to place a substantial sell order, to be done on the open, Initial small offers are posted at extremes say 40 points apart. Orders can then be placed "opaquely", unobserved, at any price between the posted bids. They are unseen. A large opening spread of 90 - 100 points is indicative of a probable "known event". A tight spread of 8 points or less reflects uncertainty. Market depth shows only the lowest 5 asks and highest 5 bids. The weight of numbers between are invisible. Broker Systems can see the AOP. Many transmit it. Some display it numerically. None display it graphically. After 10:00am its gone. We keep it. Its important.
The Match Price (AOP) has been available since 1999. As of September 2004 a search of the web will demonstrate this site and resdat.com.au are the only 2 sites mentioning it. You read it here first. Now ask the question. Is it that nobody else (a) knows about it, or (b) knows about it but doesn't understand it, or (c) knows about it and don't want to broadcast it. see it in the free "action-replay download".
As ASX orders are processed into the ITS System (previously SEATS) between 7:00am and 10:00am the consequential effect of those orders is shown as a synthetic pre-market index. This calculation is available on some trading platforms and is taken into account in the SFE pre-open. The SFE market-making robot is slaved to the ASX200 synthetic index. We know of one platform that provides the ASX.XJO preopen graphically from 7:00am. Very valuable. The same as the TAB. It shows where the weight of money is going before the "race" begins. Ask the right question. Why is this not disclosed. Not many (private traders) know about it. Not taught on courses. see price re-assessment and price exaggeration.
As software specialists we have developed a number of online-realtime-unattended mechanical racing systems to specification for serious racing clients with heavy money. People not found at the TAB. So we make this comment with some authority. All the client-systems were based on the fluctuation of "Ødds" of each runner and the size of the "total pool" in each event. A standard formula calculates the total money on each runner. Measurements of the increase / decrease are taken at 1 minute intervals during the 15 minutes prior to "start" time. In our experience, with both racing and finance market systems, such detail is equivalent to the fluctuations of the XJO pre-market and SPI pre-market, which appears to be given low priority by traders. In our opinion the racing fraternity is streets ahead of the trading fraternity in knowledge of its industry.
Q89 live application runs from 07:00 am when the ASX pre-market session opens.
Customisable to the list of your choice
Observation of which provides you with a sense of
• where the early pressure is, and • the general sentiment for the day. • the direction for the day
Observation of spi200 pre-market behaviour was first published in 2001. In the public domain. For the world to see. Seven years later no-one else mentions it. google.search "pre-open spi200". Camron clients have been using this know-how since 2001. One - a technician - achieves different results using "open" prices instead of "closing" prices. Remember - you read it here first. If it helped don't forget the donation.
Our client research papers on algorithms and index rebalancing describe :-
• the significance of VWAP activity at the open and why and how it's done.
• how to determine if index-fund-algorithms are in buy or sell mode .
know where the market is going - before it opens
A graph of the pre-open match-price.
The 10 minute preopen phase of the SFE-SPI200
For 23/07/2008 printed a high of 5150 at 09:40am.
In an unexpectedly strong up day, the SPI200 opened at 5034.
Opening up 89 points from the close of the previous day.
Then continuing up a further 114 points. Total rise of 203 points.
The eventual high for the day of 5149 was reached at 1353 hours.
The one pre-open print at 09:40:00 am lasted 1 second.
This software is exclusive to, and available only from Camron Systems Australia
Know where the market is going each day, before the market opens
market depth - during pre-open
what does market depth look like during the preopen
Market depth does not display the "match price" during pre-open phase.
