Stock Price Formulation

How are pre-opening quotes indicated?

Update : Jan. 04, 2010

Answer :

As mentioned in 'What kind of market information is available to investors?', investors are keenly interested in the state of the order book before the opening price is determined. So TSE provides pre-opening quotes in the period prior to the opening auctions (from 08:20 for the morning session, and from 12:05 for the afternoon session). This quote is an estimate of the expected opening price, and only indicates a probability. It is the price at which offers and bids are currently offered.

• What kind of market information is available to investors?

The following table illustrates the order book prior to the start of trading. As you can see the aggregated offers and bids balance out at 500 yen and 499 yen respectively. So TSE indicates a bid of 500 shares at 499 yen and an offer of 600 shares at 500 yen . This shows investors that the opening price is likely to be either 499 yen or 500 yen . TSE also provide the 7 next best buy and sell prices along with their number of shares.

Offer (sell) Price Bid (buy) Aggregate Share Share Aggregate 2,300 100 508     2,200 200 507     2,000 500 506     1,500 100 505     1,400 200 504     1,200 300 503     900 100 502     800 200 501 300 300 600 400 500 100 400 200 100 499 100 500 100 100 498 300 800     497 200 1,000     496 100 1,100     495 300 1,400     494 300 1,700     493 500 2,200     492 100 2,300     491 200 2,500

As mentioned in 'What kind of market information is available to investors?, orders continue to be placed into the trading system right up until the opening auction, so the pre-opening price will change to reflect the altered balance of the order book. Thus, the pre-opening quotes indicated at 08:30 and 08:55 could very well be different. Investors must therefore keep a careful eye on this quote, so as not to be misled.

• What kind of market information is available to investors?