Continuous trading system

In continuous trading, buyers and sellers place orders which, after being transferred to the Exchange, are either executed immediately (on the condition that their prices match), or are entered into the order book, where they await orders of the appropriate price on the other side. There are two priorities in order execution: price and order placement time. This means that whenever two orders of identical price are awaiting execution, the first one to be transacted is the one submitted earlier.

The auction procedure is also used in continuous trading.It is usually held at the opening and close of a session.Continuous trading begins with publication of the opening price (orders are accepted in the pre-opening phase; they are not executed, but the indicative opening price is determined), and closes with announcement of the closing price.When the opening price is announced, it becomes the price at which transactions are executed at the opening.Similarly, in the case of the closing price-based on orders placed in the pre-closing phase-the closing price is determined, at which transactions are executed at the closing.

It may happen, however, that it is impossible to determine the opening or closing price according to these rules.This can occur in the following situations:

• When the highest limit price on a buy order is lower than the lowest limit price on a sell order
• When only buy or only sell orders have been placed
• When no orders have been placed
• When only buy orders without a limit price or only sell orders without a limit price have been placed
• When the opening or closing price determined exceeds the price variation limits.

If any of the first three cases occurs, the opening price is the price of the first transaction concluded in the continuous trading system during a given session, while the closing price is that of the last transaction concluded during a given session. If no transaction is concluded during a session, opening and closing prices are not determined.

When the opening or closing price is being determined, if there are only buy orders without a limit price or only sell orders without a limit price, or if the price determined exceeds the price variation limits, the opening or closing price is not announced, and market balancing begins. During balancing, investors may place additional buy or sell orders, while orders placed earlier may be cancelled or modified.

If, as a result of balancing, it is possible to determine a price within the price variation limits, balancing is completed and the opening or closing price is announced.If the session chairperson decides that balancing cannot lead to determination of a price within the permissible variation limits, s/he may alter these limits, or close quotations by announcing a non-transactional opening or closing price equal to the upper variation limit in the case of a predominance of buy orders, or to the lower limit in the case of a predominance of sell orders.

If balancing leads to a divergent market, the session chairperson may extend balancing, end balancing with the simultaneous start of continuous trading (in case of balancing conducted at the opening), or end trading (in case of balancing conducted at the close of a session).

After announcing the opening of continuous trading, new transactions are concluded at a price equal to the price limit of orders awaiting execution, while orders waiting to be executed are executed according to their price limits.If limits are identical, orders are executed in the order in which they were received or displayed (in the case of hidden orders).

If, after the start of continuous trading, the price exceeds permissible variation limits, transactions are suspended and market balancing begins. The opening and closing prices are determined by applying the following principles, in this order:

• Maximisation of trading volume,
• Minimisation of the difference between the numbers of securities in buy and sell orders possible to execute at a given price,
• Minimisation of the difference between the price determined and the reference price.

On a given day, between the moment when acceptance of broker orders begins and the start of continuous trading, between the moment when acceptance of orders for closing begins and the moment at which the closing price is determined, and during the market balancing period, the indicative price is calculated on an ongoing basis.

The most liquid stocks are traded in the continuous system, as are all bonds, investment certificates, futures contracts and warrants.Subscription rights and allotment certificates are traded in the continuous system only if their underlying stocks are in this system.