NSE has announced an important modification as per the circular to the call auction process during the pre-open session for IPOs and Re-listed securities. This change, which will go into effect from September 17, 2024, brings a significant shift in how the system handles the random closure of order entry periods.
In the pre-open session for IPOs and re-listed securities, there is an order entry period where participants can place, modify, or cancel their orders. The system closes this session randomly to ensure a fair market process. Previously, this random closure only happened within the last minute of the order entry period, but the new rule broadens this closure window.
Current:
- Order Entry Period: 9:00 am to 9:45 am.
- Random Closure Window: Between 9:44 am and 9:45 am.
After Modification:
- Order Entry Period: 9:00 am to 9:45 am.
- Random Closure Window: Now can happen anytime between 9:35 am and 9:45 am.
This modification widens the potential window for when the system could close the order entry period, giving traders less certainty about when their last opportunity to place or modify orders might be.
How Does This Affect Traders?
Suppose you are a trader planning to enter an order at 9:43 am. You know the system could randomly close the session anytime between 9:44 am and 9:45 am. You have a small but predictable window to complete your actions. After the change, the system could randomly close the session as early as 9:35 am. If you wait until 9:37 am to enter or modify an order, the session might have already closed at 9:36:45, and you would miss the opportunity. This change increases the unpredictability, requiring traders to be more proactive in placing their orders earlier, well before the random closure window opens at 9:35 am. Delaying too much could lead to missed opportunities if the system closes early within the revised time range.
Why is This Change Being Made?
The broader random closure window ensures greater unpredictability, which helps in maintaining market fairness. It prevents last-minute order modifications or cancellations that could impact the market, ensuring a smoother and more transparent price discovery process.