Stephen Karpin, CommSec

Question:

“I was waiting to buy  “SIP” on Friday morning and on opening at 11:00 it was already +38%! How do people get their orders filled before open to receive the gain? On Thursday I put an order in at 7:30am to buy “AEC” at 2.680 and when it opened I did not get my order filled.  Why? How do I make sure my order is filled so I can receive the gains that I see on opening. I look forward to your reply Claire”

Response:

Trades on market do not start executing before 10am each market day. Stocks open trade in alphabetical order from A – B from 10am through to S – Z. So a stock like AAX will start trade at 10am and a stock like ZYL will start to trade from 10.09am. You can start to submit your orders from 7am each day and your order will start to appear in market in price and time priority. So the sooner you place your order each day, the higher you will be in the queue at a particular price. In addition, if your order is the only one at a particular price then no other order can be ahead of you at the very same price. For example, if you submit an order for stock XYZ at a price of $1.05 and you are the only order, then any other orders at $1.05 will sit behind your order at $1.05. Your order will have priority at that specific price. Just remember other orders have price and time priority as well, so whenever you change a price your order always goes to the bottom of the queue at the new price, unless you are the first order at that price.

To have your order executed on the open your bid/offer has to be such that the order executes during the Opening Auction phase. The opening phase is essentially where all orders that have been placed outside of market hours overlap in price and volume. Orders placed before 7am and after 4.10pm on ASX trading days are considered orders outside of market hours. Think of it as an open auction where everyone that has a bid or offer is listed on a board. The highest bidder and the lowest seller will trade as their prices overlap. The computerised system also takes into account the volume of bids and offers and determines at what price the first trades will occur at. Essentially it is an algorithm which determines how much stock will trade at the open and at what price.

If you want to buy on the open, you should set a higher limit on your bid, but be sure to decide what maximum amount you are willing to pay to buy the stock.

To participate in the opening phase, you can also keep an eye on the ‘Indicative Price’ which is displayed before market open in ‘Quote’ or ‘Market Depth’ to give you an idea of what the opening price may be. There is no guarantee however as the indicative price can change within a second.

A similar calculation occurs at the end of trade at 4.10pm. Orders after 4pm also queue up for 10 minutes until 4.10pm for the closing phase where the algorithm determines the close price for the day and the last trades for the day are executed.

By Stephen Karpin, General Manager, CommSec

Important Information
The views expressed in this article are those of Stephen Karpin, a representative of Commonwealth Securities Limited (CommSec) ABN 60 067 254 399 AFSL 238814.  CommSec ABN 60 067 254 399 AFSL 238814 is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 23495 and a Participant of the ASX Group. This article was produced by CommSec. Except to the extent that any liability under any law cannot be excluded, no liability for any loss or damage which may be suffered by any person, directly or indirectly, through relying upon any information or statement in this document is accepted by the Commonwealth Bank or CommSec or any of their directors, employees or agents, whether that loss or damage is caused by any fault or negligence on their part or otherwise. Commonwealth Bank and its subsidiaries do not guarantee the obligations or performance of CommSec or the products or services offered.  As this information has been prepared without considering your objectives, financial situation or needs, you should, before acting on this information, consider its appropriateness to your circumstances and if necessary, seek appropriate professional financial and taxation advice. The article does not representation a recommendation on any particular company.  

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