NSE To Introduce Pre-Open Session In Equity Derivatives Segment From Dec. 8

The National Stock Exchange of India (NSE) on Tuesday announced the introduction of a pre-open session in the equity derivatives (F&O) segment, effective from Dec. 8.

Mock trading incorporating the new mechanism will be held on Dec. 6 to allow members to test the updated system and contract files before the official rollout, according to the circular by NSE.

The initiative aims to bring greater price discovery and stability at market open by extending the pre-open call auction mechanism, which is currently used in equities, to futures on single stocks and indices.

The pre-open session will apply to current-month futures contracts on both single stocks and indices. During the last five trading days before the expiry of the current-month contract, the pre-open session will also include next-month futures contracts.

However, the session will not apply to spread contracts or options on stocks and indices, nor to futures on the ex-date of corporate actions arising from schemes of arrangement.

The session will operate between 9:00 am and 9:15 am and will be divided into three phases. The order entry period will run from 9:00 am to 9:08 am, allowing market participants to enter, modify or cancel orders. This period will close randomly between the seventh and eighth minute, similar to the equity pre-open mechanism.

The order matching and trade confirmation period will follow immediately, running from 9:08 am to 9:12 am, during which the opening price will be determined based on the equilibrium of demand and supply. The buffer period between 9:12 am and 9:15 am will facilitate the transition to the continuous trading session.

Orders in the pre-open session will be validated for margin sufficiency before acceptance. Both limit and market orders will be allowed, although special order types such as stop-loss and immediate-or-cancel (IOC) orders will not be permitted. The equilibrium or opening price will be the price at which the maximum executable volume occurs.

In cases where multiple prices meet the criteria, the system will use additional parameters such as minimal order imbalance and proximity to the previous close to finalise the opening price.

Any unmatched limit orders from the pre-open session will move into the regular market retaining their original time stamps, while unmatched market orders will be converted to limit orders at the equilibrium price.