The opening and closing auctions can be confusing to understand. We explain these in detail.
Unsurprisingly, many people get confused when it comes to the market trading periods that exist beyond the official ‘opening’ and closing’ times of the ASX (Australian Securities Exchange). Most of us are aware that the ASX ‘commences’ trading at 10:00am and ‘ceases’ trading at 4:00pm, but are baffled to learn that there are small windows on either side of these times during which one can enter buy or sell orders in the market. I’ll run through these ASX market phases in an effort to alleviate some of the confusion surrounding this topic.
ASX Pre-open from 7am to 10am
Between 7:00am – 10:00am AEST, we have what’s known as the ‘Pre-open’ market phase. During this time, orders can be entered into the market but there is no trading going on.
Simply, buyers and sellers quote the different prices they are willing to accept (sellers) or pay (buyers) for their shares. At 10am (Open), when the market opens for trading, the overlapping bids and offers which exist within the market are matched off against each other.
The ASX algorithm to set the opening auction
Basically, an algorithm is used to determine the volume on the buy side versus the volume on the sell side, as well as the prices at which they have been placed. This algorithm results in an official ‘auction’ price, which is the price at which the stock opens.
The algorithm is obviously only applied when an even or overlapping market exists, as when all buy orders are lower than all sell orders, there is yet to be an opening price; that will only occur when a buyer lifts their price to meet a seller, or a seller lowers their price to meet a buyer, at which point a trade is executed and an opening price is generated.
Matching ASX orders on the open
So with an overlapping market, all buy orders that had been submitted above the auction price will have traded, just as all sell orders that had been submitted below the auction price will have traded.
Buy orders below the auction price and sell orders above the auction price will be sitting in the market still, not having yet traded at the prevailing market price.
Let’s use Telstra (TLS) as an example. On the 22nd of March, 2017, Telstra closed at $4.55. Between 7:00am – 10:00am AEST on the 23rd of March, you would be able to submit your buy or sell orders on TLS. If a trader enters an order to buy 1000 TLS at $4.60, and the auction price ends up being $4.51, that trader will have purchased the stock at $4.51 on the opening auction. However, if the trader had entered their order to buy 1000 TLS at $4.50, their order will still be sitting in the screen unfulfilled, trading 1c below the prevailing market price.
ASX staggered open times for all stocks
At 10:00am AEST, the market opens for ‘Normal Trading’, but on a staggered basis. By this, I mean all ASX stocks open alphabetically at set times. Here are the staggered ASX opening times:
- Stock codes starting with A-B open at 10:00:00am (+/- 15 seconds);
- Stock codes starting with C-F open at 10:02:15am (+/- 15 seconds);
- Stock codes starting with G-M at 10:04:30am (+/- 15 seconds);
- Stock codes starting with N-R at 10:06:45am (+/- 15 seconds);
- Stock codes starting with S-Z at 10:09:00am (+/- 15 seconds);
The market then trades as usual until 4:00pm. At 4pm, the market enters what is known as ‘Pre-CSPA’ (Closing Single Price Auction). Between 4:00pm – 4:10pm, orders can be entered into the market and existing orders can be amended.
We have a similar situation to that of the Pre-Open phase. It’s handy to know of this period, as some investors I’ve spoken to just after 4pm, who are very keen to either buy or offload some shares that day, think it’s too late for them. And yet, they can still buy or sell if they get in by 4:10pm.
The final ASX closing time
At 4:10 pm, we have the Closing Single Price Auction, where the algorithm applies again to determine the closing auction price at which any overlapping orders are matched off against each other.
Other ASX market times to be aware of
There are other market ‘phases’, such as ‘System Maintenance’ at 6:59pm – 7:00pm for example, but they are of no importance to traders. The market is effectively in ‘Close’ phase overnight, and it all starts again at 7:00am with the Pre-Open phase. So in summary:
| Time | Phase |
| 7am-10am | Pre-Open |
| 10-10:09am | Open (staggered depending on first letter of stock code) |
| 10am-4pm | Normal Trading |
| 4pm-4:10pm | Pre-CSPA |
| 4:10pm | Closing Single Price Auction |
