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ASX trading phases

Auctions provide investors with the ability to trade in a single point in time, bringing together the widest and most diverse range of counterparties, delivering transparent and effective price formation. 

ASX goes through a number of different phases each trading day. The particular market phase determines the type of action that can be taken for an order on ASX Trade, which in turn affects how trading is conducted.

The same method is used to calculate the following price points:

  • Opening prices at the start of each trading day.
  • Closing prices at the end of each trading day.
  • Float prices (Initial Public Offerings "IPO").
  • The price of a security after a price sensitive announcement has been received and/or a security's trading halt or suspension has been lifted.
  • The price of a security after a new listing.


How opening and closing prices are calculated

The opening and closing price for a security is determined by a 4-step approach involving the use of conditional decision rules. 

There is a short period before Opening and Closing, called Pre-open. During Pre-open, new orders may be entered, but they do not trade against each other. Because of this, the market may overlap with buy prices being higher than sell prices. 

The first principle establishes the price(s) at which maximum volume will be executed.

There are two steps involved in applying this principle:

  • Step 1 determines the Cumulative Buy and Sell quantities at each eligible price. The Cumulative Buy quantity increases as prices decrease, and conversely, the Cumulative Sell quantity increases as price increases.
  • The second step establishes the total tradeable volume at each eligible price step. The total tradeable volume at a price is the minimum of the Cumulative Buy and Cumulative Sell quantities at that price.

When there is no overlap. The algorithm will only be applied when an even or overlapping market exists. If the market does not meet these conditions before opening, the opening price is the price of the first trade executed when the market opens.

If the market does not overlap before the Closing Single Price auction, the closing price is the price of the last trade executed before the market closed. 

To further narrow the choices for an auction price we use principle 2 to determine the Minimum Surplus level.

This principle establishes the eligible price levels at which the unfilled or unmatched quantity is a minimum. The quantity of shares left in the market at the auction price should always be the lowest possible.

The Minimum Surplus (MS) at each price level is equal to Cumulative Buy Quantity - Cumulative Sell Quantity.

This steps ascertains where the market pressure of the potential auction prices exists: on the buy or the sell side.

A positive sign (+) indicates a surplus will be left on the buy side, demonstrating buy side pressure at the conclusion of the auction. A negative sign (-) indicates a surplus will remain on the sell side, demonstrating sell side pressure at the conclusion of the auction.

If the market pressure is on the buy side, then this step uses the highest of the potential auction prices. If the market pressure is on the sell side, then it chooses the lowest of the potential auction prices.

The reference price is the last on-market traded price. Where on-market trades have occurred on the current trading day, the reference price will be the price of the latest on-market trade executed on that day. If, during the current trading day, an on-market trade has not occurred, the reference price will be the official closing price of the previous trading day i.e. the price of last trade executed on the previous trading day.

There are two parts to this step:

Part 1: The first part of is to narrow the options of potential auction prices to two within the entire range of possible auction prices as follows:

  • If the result of Step 3 is a combination of positive and negative Market Pressure, then the algorithm marks the two prices where the sign changes.
  • If the Minimum Surplus for all possible auction prices is zero, then the algorithm marks the highest and lowest prices within that range as the potential auction prices to be applied in this principle.

Part 2: The second part is determining the relationship between the reference price and the final auction price as follows:

  • If the reference price is equal to or greater than the higher of the two possible prices established in the first section of this principle, then the higher price becomes the auction price.
  • If the reference price is equal to or less than the lower of the two possible prices established in the first section of this principle, then the lower price becomes the auction price.
  • If the reference price lies between the two possible prices established in the first section of this principle, then the reference price itself becomes the auction price.

If a reference price does not exist, for example, in the cases of an Initial Public Offering, new listing or the first day of trading a security on a reconstructed basis, the auction price becomes the lower of the two potential auction prices established in the first section of this principle.

Please note, ASX has discretion under its Operating Rules to take action if necessary to maintain orderly trading, which may impact the normal operation of the market.