What are share market pre-open and pre-close orders and how do they work?
Pre-open and pre-close are small windows before official market opening time (pre-open) and official market closing time (pre-close) where investors can enter buy and sell orders on the market.
What’s the purpose of pre-open and pre-close?
Some investors like to place orders outside normal market hours to respond quickly to announcements made by companies outside market hours. Because share prices change so quickly, for these investors, it’s about getting in early and beating the competition.
What happens during pre-open and pre-close?
No trading takes place during pre-open and pre-close periods. The orders simply sit in the system and are evaluated by the stock exchange using a special algorithm.
- If the highest buy order is at a higher price than the lowest sell order, the algorithm will determine the ‘match-off price’ – which is basically the middle ground between the different buy and sell orders. If your limit order is within the range of the match-off price, then it will trade when the market opens.
- If the highest buy order is lower than the lowest sell order, then no trades take place and the order will sit in the queue as usual.
For the New Zealand Exchange (NZX), the pre-open match-off is 15 minutes before the market officially opens, and the match-off price determines the day’s opening price. Likewise, the pre-close match-off is 15 minutes before the market officially closes, and the match-off price determines the day’s closing price.
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