The opening auction and closing auction are always held at the same time on the stock markets; these are periods in which the quotation prices of the securities are negotiated, with a random closure of 30 seconds. In this article, we give you the keys to understanding how long these auctions last and how they work.
What are the opening and closing auctions?
The opening and closing auctions are periods of trading on the stock market in which we can introduce, modify, and cancel orders, but the trades are not executed, and the system calculates in real time a price of equilibrium between supply and demand. All auctions end with a random closure of 30 seconds; this implies that the opening hours of the stock exchange are located in that random period.
The purpose of this randomness in the opening and closing auctions of the stock exchanges derives from the need to avoid speculation and suspicious volatility in the quotations of the various companies, which can interfere with the prices. Only after the end of an opening or closing auction can we know the result of the negotiations. It should be noted that you cannot buy and sell during the auction, both at the opening and closing.
How long does the opening auction last? How does it work?
The opening auction starts at 8.30 in the morning and ends at 9:00, although it ends with a random closure of 30 seconds, with which the opening of the stock exchange trading begins with a random opening as a result of the closing of the opening auction.
At the opening auction, all purchase and sale orders are received and ordered, offering in real time the equilibrium price at which the orders to end the opening auction at that moment would be executed. At the end of the opening auction, the negotiations will be executed. Therefore, the price set at the opening auction will be the opening price of the market.
During the opening auction orders can be introduced, modified, or canceled, but no negotiations are executed. Only the volume and equilibrium price of the auction are shown. When the opening auction ends, the result of the execution of our orders will be notified. If they have not been executed, they are recorded in the order book, the opening price and traded volume are reported and the market is opened.
Instead of waiting around for the auction, you can head right down to the stock market to invest in the Top FTSE 100.
What is the volatility auction? What is it for?
This type of auction in the stock exchanges is a security and protection mechanism that can be activated at any time during the day when there are fluctuations between prices and the limits of the static range or the dynamic range are exceeded. That is when the purchase-sale prices do not match. During this volatile auction, the quotation is inhibited until the prices match again.
Do not confuse this volatility auction with a suspension of the quotation, since the latter occurs in situations in which the value is being altered by circumstances that the CNMV considers may be detrimental to investors.
How long does the closing auction last? What is it for?
The closing auction in the European stock market starts at 17:30 and ends at 17:35, with a range of 30 seconds of randomness.
The closing auction is carried out to avoid, as far as possible, some investors interfering with low volumes in the closing price of the session quotes. The closing price has special interest because it is the reference price to carry out the settlements in the options and futures market, some structured products. That is why it closes with a range of 30 seconds of randomness.
It is possible to buy in the closing auction, but always at the end. You can never buy during a closing auction, or a opening auction. You can only enter buy and sell orders, modify them, or cancel them. During the closing auction, orders are accumulated that remain pending to be executed, and when the closing auction ends, the closing price is calculated through an algorithm, and all the orders that can be executed at that closing price are executed. The closing price of the auction is the official closing price of the session.
The New York exchange is also highly important for UK investors. If you’d like to learn about the schedule of the NYSE, check out this article.
How is the equilibrium price set in auctions?
The price of the auction is chosen at which the greatest number of titles is negotiated. If there are two prices in the auction with the same volume, the one that generates the least imbalance is chosen. If they coincide in price and volume, the price of the side (offer or demand) with the greatest volume will be chosen, if they all coincide, the one that is closest to the last traded price will be chosen.
Auction schedules in international exchanges
Below, we can see the auction schedule of international exchanges in UK time
|Region||Opening Auction||Closing Auction|
If you want to know more about the schedules in the UK stock exchange, we recommend you read this article: Stock Exchange trading hours and sessions.
Can I buy or sell stocks during the opening or closing auctions?
No, you cannot buy or sell stocks during these auctions. You can only introduce, modify, and cancel orders.
What is the purpose of the volatility auction in stock exchanges?
The volatility auction serves as a protective mechanism triggered when price fluctuations exceed static or dynamic range limits. It temporarily inhibits trading until price stability is restored.
What is the significance of the closing price in stock markets?
The closing price is essential as it serves as a reference point for settlements in options, futures, and some structured products. It is the official closing price for the trading session.