NSE pre-open session rules to change from September 7: Here's how the new system will work

The National Stock Exchange (NSE) is set to revise the rules governing its pre-open session from Monday, September 7, while keeping the overall session timings unchanged.

The key changes include splitting the order-entry period into two phases and imposing restrictions on market orders during the second phase. The revised framework is aimed at aligning the pre-open session with Sebi's introduction of the Closing Auction Session (CAS) in the equity cash market.

The changes are also intended to bring greater alignment between the cash and derivatives segments and ensure a smoother transition in market operations.

How NSE's revised pre-open session will work

Effective September 7, the order-entry period will be divided into two phases. Phase 1 will run from 9:00 AM to 9:05 AM, during which order entry, modification and cancellation will be permitted for both limit and market orders.

This will be followed by Phase 2, from 9:05 AM to 9:10 AM, during which only limit orders can be placed, modified, or cancelled. Market orders will not be permitted during this period and will be rejected. The exchange may also apply a random closure during the final two minutes of this phase.

The order-matching and trade-confirmation session will run from 9:10 AM to 9:12 AM, compared with the current timing of 9:08 AM to 9:12 AM. During this period, the opening price will be determined, orders will be matched, and trades will be confirmed.

This will be followed by a buffer period from 9:12 AM to 9:15 AM, allowing for a smooth transition from the pre-open session to the continuous trading session.

Which securities are covered under the pre-open session?

The pre-open session, which follows a call auction mechanism, is applicable to all securities in the equity market, including SME securities, partly paid-up securities, InvITs, and REITs.

The pre-open session broadly consists of two stages: the Order Collection Period, during which investors can place, modify, or cancel orders, and the Order Matching Period, during which orders are matched, and the opening price is determined.

Why is NSE revising the pre-open session framework?

The NSE is revising the pre-open session framework to align the opening price-discovery process with the new Closing Auction Session (CAS) mechanism introduced in the equity cash market on August 4.

The CAS framework is aimed at making the closing price-discovery process more transparent and robust. It applies to cash-market stocks with derivative contracts and uses an auction-based mechanism that aggregates buy and sell interest into a single pool of liquidity to determine the closing price.

Sebi has said the framework is expected to improve execution efficiency for large orders, support fair settlement of derivatives and indices, and enable passive funds to transact at closing prices with lower tracking errors.