What is the process of stocks being sold?

[ctur0001]

Hi everyone,
My question is if before the ASX market opened (pre 10am) there is a surplus of demand on a stock lets say 20 buyers looking to buy 1 volume each (totalling 20 volume) at x price, relative to 10 supply at x price. How will the ten stock be allocated to the 20 buyers when the market officially opens. In other words is it based on the time the stock was bought or is it randomly sold to the ten buyers.

For example if ten buyers bought the stock between 9:00 am and 9:10am (before the stock market opened). And the other 10 buyers purchased the stock between 9:10 and 9:55am (before the stock market opens). When the stock market officially opens at 10am will the first ten buyers receive the volume or will it be randomly allocated to 10 of the 20 buyers regardless of the time purchased.

- Cheers Chris

 

[tech/a]

At both ends of the trading day you have the open auction and the closing auction
Google it
Your not the first to ask

 

[greggles]

Hi Chris, this thread will answer your question: https://www.aussiestockforums.com/threads/thread-1-000-000-about-the-pre-open.11619/

 

[HelloU]

Hi everyone,
My question is if before the ASX market opened (pre 10am) there is a surplus of demand on a stock lets say 20 buyers looking to buy 1 volume each (totalling 20 volume) at x price, relative to 10 supply at x price. How will the ten stock be allocated to the 20 buyers when the market officially opens. In other words is it based on the time the stock was bought or is it randomly sold to the ten buyers.

For example if ten buyers bought the stock between 9:00 am and 9:10am (before the stock market opened). And the other 10 buyers purchased the stock between 9:10 and 9:55am (before the stock market opens). When the stock market officially opens at 10am will the first ten buyers receive the volume or will it be randomly allocated to 10 of the 20 buyers regardless of the time purchased.

- Cheers Chris

my laymans answer to the first paragraph (I think I followed it)........Note: talking here at open and at 4:10pm washup. Asx sets the open price based upon orders (you can look up at asx site to get maths involved or read threads as others suggest) but to answer your specific example above where 20 buyers but only 10 sellers then orders filled by queue position on ASX Trade. First in best dressed - thats the short answer. Long answer is sometimes queue jumping occurs at auction to maximise the volume of trades possible.......I will end up looking dumb if I try to give anymore explanation and only confirm my lack of knowledge.

For second paragraph, the trades that are recorded much earlier in the day (say 9am) are not included in the above explanation. They are other 'deals'.

 

[ctur0001]

Thanks all. Have a much clearer understanding of pre-open works. Didn't know what to really google but after researching the links provided i feel this statement below gives a very clear understanding for everyone.

"Because orders can be entered during Pre-open but trades do not take place, orders may ‘overlap’. This means that highest Buy orders may be at a higher price than the lowest Sell orders. Special rules are required to resolve the difficulty this creates.

For example, a stock in Pre-open has a Buy order at $10 and a Sell order for the same quantity at $8. ITS will not trade these ‘overlapping’ orders. When normal trading (or the CSPA) resumes, these ‘overlapping’ orders will trade at a price known as the Match Price or Single Price Auction. The Match Price is continually updated as new orders enter the system.

But what should that price be? If the system set the price in our simple example at, say, $9.00, then both parties would be satisfied. The buyer would be buying more cheaply than her order specified, and the seller would get more than he was prepared to accept. However, this will be the case at any price between $8 and $10. While it may appear to be fair to “split the difference”, that may not be the fairest solution in the real world, when many orders at various prices and volumes will often exist.

Note that the method described only has effect if there are overlapping orders. If the highest Buy order for a stock in Pre-open is lower than the lowest Sell order, then no trades take place and those orders will remain in the queue established by price and time in the system until cancelled, amended, purged or traded in the normal way in the open market.

Calculating the Match Price 

To calculate the single Match Price, four principles are applied in order. Each stage provides a filter for the next, so that only those possible prices that survive from the first stage are considered in the second. If only one price is possible after applying the rules at any stage, then that becomes the Match Price and it will not be necessary to go to a further stage.

Consequently, if a price can be established under the first of the principles, then that will be the Matched price. The fourth principle always establishes a single price.

The principles applied are these.

1. The price should be the one that provides the maximum volume of executed trades.
   For example, if there are 70,000 buy orders at a price of $10 or less, and 30,000 sell orders at $10 or more, then clearly 30,000 shares would trade if the price were $10. If there were a price at which a higher number of trades would take place, then that would become the Match Price under this first principle.
If the exactly the same volume of trades would be executed at more than one price, then a choice among them will be made by applying the second principle
2. The price should be the one that leaves the least quantity of shares in unfilled orders.
   For example, in the example used in principle 1, 30,000 shares would trade if the price were $10, and 40,000 buy orders would remain unfulfilled. If any other price that was still a possibility after principle 1 resulted in fewer unfulfilled orders, then it would become the Match Price.
If the same quantity of shares in unfilled orders would arise at more than one price, then a choice among them will be made by applying the third principle
3. The highest potential price should be used if market pressure is on the buy side, the lowest if the pressure comes from sellers.
   For example, using the same example again, if two prices remained from principle 2, then the higher of them would become the Match Price, because the unfilled orders are on the buy side. If pressure comes from both sides, the final principle will be applied.
4. The price should be set with reference to the last traded price.
   If the last traded price is within the range of potential prices that are still possible after applying Principle 3, then that will be the Match Price. Otherwise, the Match Price will be the potential price that is closest to the last traded price. For example, assume two prices, $10.90 and $11, are still possibilities after principle 3 is applied. If the last traded price was between these prices, for example $10.95, then that would be the Match Price. If the last price had been $11.05, however, that would lie outside the range, so the closest of the possible prices, in this case $11.00, would be the Match Price." https://www.adviservoice.com.au/2010/06/pre-open-pricing-on-the-asx/