Call Auction In Pre open session

1. Call Auction In Pre open session Bombay Stock Exchange Ltd.Pioneering Indian Capital Market

2. Call Auction • Orders are pooled in the order book but remains unexecuted till the end of the order entry period, when the orders will get matched and get executed at the single call auction price that is so determined. • Call Auction can be applicable : • At Open • At Close • Intraday • Post Halt • Initially Call auction session will be applicable for only SENSEX 30 & NIFTY 50 scrips. • Scrips which will get excluded or included in the SENSEX or NIFTY indices will still be a part of the pre-open session.

3. Advantages • Reduced price volatility due to multiple matching of orders at a single price • Greater liquidity due to deeper demand supply schedule • Better Price discovery • Reduced market impact • Fairer market especially for small, non professional investors because all trades get executed at the same price • Simultaneity of trades eliminates possibility of front running customer orders

4. Trading Schedule

5. Order Execution Order Types Pending Orders • Limit Orders & Market Orders • No Iceberg orders (orders with reveal Qty) will be allowed. • IOC Flag will be applicable to both Limit & Market orders. • All unmatched orders will move to the continuous session on price time priority • Market orders will move to the continuous session at the opening price • If there are no trades in the pre open session, orders will be shifted to the continuous session and the price of the first trade in the continuous will be the opening price • Limit with Limit • Residual Limit with Market • Market with Market Execution Priority

6. Risk Management • The margining and the collateral system will be similar to the current cash market system • Uniform price bands of 20% applicable • A breach in the index will trigger a halt at the start of the continuous session as per the current practice in the cash market

7. Volume Maximization Algorithm Opening Price = Price at which Maximum Quantity is tradable If multiple prices exist then Opening Price = Price at which there is Minimum Absolute Order Imbalance If multiple prices exist then Opening Price = Price closest to the Previous Closing Price

8. Example 1: Maximum quantity tradable Order Book: Demand Supply Schedule: • Rs.95 will be the market opening price & 350 units of the stock would get executed into trade at that price. • If there are multiple price points with same traded quantity, we proceed to the next example

9. Example 2: Minimum absolute order Imbalance Demand Supply Schedule Order Book: • Since there are 2 prices – Rs.96.20 & Rs.96.30 at which the match-able quantity is maximum, we look at the absolute order imbalance and select the price with the lowest order imbalance, which is at Rs.96.20. -Hence, the market opening price in this case will be Rs.96.20 and 2000 units of the stock would get executed into trade at that price. • If there are multiple, volume maximizing prices at which the order imbalance is minimum, we proceed to the next example

10. Example 3: Reference to previous closing price Demand Supply Schedule Order Book: • Since there are 2 prices at which the match-able quantity is maximum as well as the absolute order imbalance is also the same, the price closest to the previous closing price is considered as the open price. • If Previous close is Rs.96.50, then the market opening price = Rs.96.30 , If Previous close is Rs.96.10, then the market opening price = Rs.96.20 , • If Previous close is Rs.96.25, then the market opening price = Rs.96.25 (since the previous close is at the mid-value of the price points where match-able quantity is maximum and the demand supply gap is same)

11. Information Dissemination • Indicative opening price • Indicative cumulative buy and sell quantity • Indicative index • The market depth will display the indicative opening price along with the next four prices