It's the opening auction. You see the same after 4pm when trading ceases before the closing auction at 4:10pm. Full information is here:
https://www2.asx.com.au/markets/trade-our-cash-market/asx-equities-trading/auctionsIn short, let's say the stack looks like this:
| Buy price | Buy quantity | Sell quantity | Sell price |
|---|
| 1 | $1.00 | 1,000,000 | 45,000 | $1.00 |
|---|
| 2 | $0.95 | 500,000 | 1,000,000 | $1.20 |
|---|
You want some of those for $1... it's great value... but that order already there at $1.00 is going to take the lot. But you can jump ahead with a higher bid.
| Buy price | Buy quantity | Sell quantity | Sell price |
|---|
| 1 | $1.50 | 10,000 | 45,000 | $1.00 |
|---|
| 2 | $1.00 | 1,000,000 | 1,000,000 | $1.20 |
|---|
| 3 | $0.95 | 500,000 |
|
|
|---|
When the auction is settled the ASX starts at the top of each list. Your order for 10k gets filled first, leaving 35k on the sell side. The 35k gets allocated to the next buy down the list, and so on until the overlap is gone. In this case there will be 965,000 left at $1.00 on the buy side. The auction price is set at the price of the last of the overlapping orders. In this case 1.00.
Everybody pays that price. So you get your 10k shares at $1.00 each.
Big traps in the auction to be wary of:
- If the seller of those 45k shares cancels their order before the auction, you're going to end up with 10k shares at $1.20.
- If a new buyer drops in with 40k shares at $1.75, you're going to end up with 10k shares at $1.20. Remember, the price is set at the last of the overlap which would be the last 5k going to you at $1.20.
It's fun to watch the action in the pre-open. You'll see
massive orders appear and disappear on both sides to try and shape the outcome.
It's a lot less fun to participate in the pre-open. You will almost never get what you want if you try to jump ahead on either side. The safest way to play in the auction is to decide what you are prepared to pay on open and price your orders at that. If the auction settles lower then you're ahead. If it settles higher than your price then you're safe.
(20min delay)