Share price on market open?

[Dukey]

For some time I have wondered what happens on the opening of asx when buyers are offering a premium to the sellers demand.

Current Example:
ESG today - last closing price 38.
Buyers bidding 39 and 38.5 c
Sellers in line from 37.5 and up.
>> so the buyers are offering a premium to what the sellers want right?

So who decides what the actual sale price will be - and how do they decide?

Also wondering - does the depth list shown on comsec include the whole market or only comsec customers??

 

[Uncle Festivus]

Have a read here -

http://www.asx.com.au/investor/education/basics/open_Close.htm

 

[Dukey]

Thanks Unc. Nice link. answer looks complicated ! but I'll read on.

In my example ESG just opened at 38c - same as the last price on friday I believe.

 

[ozambersand]

Thanks for the link, I have looked at it.

Today was a good example of what happens. Here are the pre-open bids for Zinifex:

........BUY................................................................SELL
Number...Quantity.............. Price....................Price......Quantity.. Number
4........... 15,485.................21.06......1...........16.81........8,318........1
1........... 43,289................ 21.01.......2...........16.93........2,100........1
1...............665.................20.40.......3............17.00.......3,200........1
.1...............291................20.20.......4...........17.10.........1,784.......2
1...............498.................20.00.......5...........17.20.........1,200 .......1
1........... 12,000.................19.50......6............17.50..........6,000.......2
1.............3,000................ 19.31.......7...........17.53............110........1
2.............4,120................ 18.96.......8...........17.60..........1,296.......1
1.................62.................18.77.......9..........17.67.............800.......1
3............30,640.................18.50......10..........17.68.........9,100.......2

(Sorry for the weird looking table - the tabs didn't work and not sure how to do it otherwise )

First glance is someone is buying at $21 and someone is selling at $16.81. Your initial reaction is "What the...."

But as seen on the ASX explanation (my highlighting), one of the important things I hadn't realised is in the first of many complicated steps to determine the opening price:

Principle 1: Determining the Maximum Executable Volume

The principle establishes the price(s) at which maximum volume will be executed.

There are two steps involved in applying this principle. The first determines the Cumulative Buy and Sell quantities at each eligible price. The Cumulative Buy quantity increases as prices decrease - a buy price is the maximum that a buyer is willing to pay for their shares, however, it is accepted that the buyer is willing to pay a lower price. Conversely Cumulative Sell quantity increases as prices increase - a sell price is the minimum a seller will accept for their shares but the seller will accept a higher price.

Hence what looks like an outlandish bid actually just makes sure they are in the auction.

I found the examples a bit hard to read and understand, so I still have to work out how they make the calculation, but now I understand that what price is quoted is basically a "reserve" they don't expect to meet.

So what happened in actual fact with Zinifex today is that it seems that the pre-open auction resulted in a buyprice of $18.17 and something like 600,000 were involved in that auction.

My new question is, if you stipulate a fixed price on an etrading site, is there any chance your trade could be caught up in an opening auction? ie go for something other than you stipulated?

Presumably if it did it would be lower (if buying) and higher (if selling) Is this correct?