Description

BSE introduces a 15-minute pre-open session (9:00-9:15 AM) for equity derivatives futures contracts, with specific eligibility criteria and order matching procedures.

Summary

BSE has introduced a pre-open session in the Equity Derivatives Segment operating from 9:00 AM to 9:15 AM. The session applies to current-month futures contracts on both Indices and Single Stocks. During the last five trading days before expiry, next-month futures contracts are also included. Calendar spread futures and all option contracts are excluded. The continuous trading session will commence at 9:15 AM after the pre-open session ends.

Key Points

  • Pre-open session duration: 15 minutes (9:00 AM - 9:15 AM)
  • Eligible contracts: Current-month Index and Stock futures; next-month futures during last 5 trading days before expiry
  • Excluded contracts: Calendar spread futures and all option contracts
  • Only Limit Orders and Market Orders permitted during pre-open
  • Special orders (displayed quantity, stop loss) not allowed
  • Order entry period: 9:00 AM - 9:07/08 AM with random system stoppage
  • Order matching period: 9:08 AM - 9:12 AM
  • Buffer period: 9:12 AM - 9:15 AM
  • Continuous trading starts: 9:15 AM for all derivative contracts

Session Structure

Order Entry Period (9:00 AM - 9:07/08 AM)

  • Order addition, modification, and cancellation allowed
  • System-driven random stoppage between 7th and 8th minutes
  • No trades executed during this period
  • Dissemination of Indicative Price and Matchable Quantity

Order Matching Period (9:08 AM - 9:12 AM)

  • Starts immediately after order entry period completion
  • Opening price determination through volume maximization logic
  • Order matching and trade confirmation
  • No order modifications or cancellations allowed

Buffer Period (9:12 AM - 9:15 AM)

  • Facilitates transition to continuous trading session
  • No order addition, modification, or cancellation permitted

Order Types and Priority

  • Permitted: Limit Orders, Market Orders, End of Session orders, IOC orders
  • Not Permitted: Displayed quantity orders, Stop loss orders
  • Execution Priority: Limit orders get priority over market orders
  • Market Order Execution: If no limit orders exist, all market orders execute at last closing price
  • Modification/Cancellation: Only allowed during first 7-8 minutes of order entry period

Opening Price Discovery Mechanism

Opening price determined using volume maximization logic with three-tier criteria:

  1. Primary: Price at which maximum quantity is tradable
  2. Secondary: Price with minimum absolute order imbalance (if multiple prices have same maximum quantity)
  3. Tertiary: Price closest to previous day’s closing price (if multiple prices have same order imbalance)

Contract Identification

New field added to market data files to identify eligible contracts:

File: EQD_CODDMMYY.csv, EQD_CO_abr_DDMMYY.csv, EQD_INDEX_CODDMMYY.csv

  • Field Name: Pre-Open session Indicator
  • Values: “0” = Not in Pre-Open session, “1” = In Pre-Open session

File: BSE_EQD_CONTRACT_DDMMYYYY.csv, BSE_EQD_CONTRACT_abr_DDMMYYYY.csv

  • Field Name: Pre-Open session Indicator
  • Values: “0” = Not in Pre-Open session, “1” = In Pre-Open session

Important Dates

  • Effective immediately upon circular implementation
  • Next-month futures included in pre-open during last 5 trading days before current-month contract expiry

Impact Assessment

Market Impact

  • Enhanced price discovery mechanism for derivatives opening prices
  • Reduced volatility at market open through structured order matching
  • Improved transparency with indicative price dissemination during order entry period

Operational Impact

  • Trading members must adjust systems to handle new session timings
  • Market data feeds will include new pre-open session indicator field
  • Order management systems need updates to restrict special orders during pre-open
  • Traders must adapt strategies for 9:15 AM continuous session start instead of 9:00 AM

Participant Impact

  • All equity derivatives market participants affected
  • Option traders unaffected as options remain excluded from pre-open
  • Calendar spread traders continue with 9:15 AM session start

Impact Justification

Introduces significant structural change to equity derivatives trading with new session timings and order matching procedures affecting all derivative market participants