What is periodic order matching? and why is it important? The article explains in detail ATO, ATC sessions, principles and specific examples for you to trade more effectively.
What is Periodic Order Matching?
Periodic order matching (English: Periodic Call Auction) is a securities trading method in which buy and sell orders are entered into the system within a certain period of time but not matched immediately. Instead, all valid orders will be aggregated and the trading system will determine a single price at which the maximum volume is achieved. All qualifying buy/sell transactions will be executed simultaneously at this price at a predetermined time.
Main purpose of What is periodic order matching?? That is:
- Determine the opening price (ATO) and closing price (ATC): This is the most important role, helping the market have an official reference price at the beginning and end of the trading day, reflecting the balance of supply and demand at key moments.
- Reduce sudden price fluctuations: By aggregating orders and determining a single price, periodic order matching helps limit excessive price “dancing” caused by individual orders at the beginning or end of the session.
- Increased transparency: Determining prices based on the aggregate of supply and demand at a point in time helps create fairer prices for all participants.
This method is often applied at sensitive times of the trading session, where determining a representative price is important for the entire market.
What is periodic order matching and why is it important?
What is a Periodic Order Matching Session?
When understood What is periodic order matching?, we need to know when it happens. What is a periodic order matching session?? It is the specific period of time during the trading day where the periodic order matching method is applied to determine the price and execute the transaction.
In the Vietnamese stock market, there are two main periodic order matching sessions taking place every day on the Ho Chi Minh City Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX):
- Periodic order matching session determines opening price (ATO Session – At The Opening): Takes place early in the morning.
- Periodic order matching session determines closing price (ATC Session – At The Closing): Takes place in late afternoon.
During the time of the periodic order matching session In this session, investors can place, modify or cancel ATO (for opening session) and ATC (for closing session) orders. The system will continuously synthesize and calculate the expected matching price and matching volume. However, the transaction only actually takes place at the end of the session.
Understanding the time frame and characteristics of each What is a periodic order matching session? will help investors be more proactive in placing buy/sell orders at desired prices at the beginning or end of the day.
Note: UPCoM floor does not apply periodic order matching sessions ATO and ATC like HOSE and HNX.
What is the Opening Periodic Order Matching (ATO Session)?
What is open periodic order matching? This is the ATO (At The Opening) session, the first trading session of the day, using the periodic order matching method to determine the opening price of the stock exchange, and fund certificates.
- Time:
- On HOSE floor: From 9:00 to 9:15 daily.
- On the HNX: There is no separate ATO session, the reference price is used as the starting price. (Note: Regulations may change, investors need to update information from the Exchange). However, the concept of periodic opening order matching can still be understood as the mechanism for determining the opening price of the day if applicable. In the current context of Vietnam, ATO is mainly associated with HOSE.
- Purpose: Determine the first trading price of the day (opening price) for each security, based on the sum of buy and sell orders placed during this period. This price will reflect investor expectations and sentiment after an overnight or holiday, based on the Market News and latest information.
- Command type used: Only ATO and limit orders (LO) are entered into the system during this session.
- ATO Order: An order to buy or sell securities at the opening price. This order takes precedence over limit orders (LO) when matching orders. An ATO order does not specify a specific price.
- LO order (in ATO session): An order to buy/sell at a specified price or better. This order will be considered for execution at the ATO price if that price satisfies the order's conditions.
- Result: At exactly 9:15 (on HOSE), the system will determine the ATO price – the price at which the largest possible trading volume can be executed. Appropriate ATO and LO orders will be matched at this price. The ATO price then becomes one of the bases for calculating the reference price for the next trading session.
Clearly understand What is periodic opening order matching? helps investors decide whether to enter early to buy/sell at the first price of the day, especially when strong volatility is expected based on overnight news.
What is the Closing Periodic Order Matching (ATC Session)?
Similar to ATO, What is periodic closing order matching? This is the ATC (At The Closing) session, the last trading session of the working day, using the periodic order matching method to determine the closing price of the stock.
- Time:
- On HOSE floor: From 14:30 to 14:45 daily.
- On HNX floor: From 14:30 to 14:45 daily.
- Purpose: Determine the last trading price of the day (closing price) for each stock. The closing price is very important because it is often used to:
- Calculate the reference price for the next trading day.
- Calculate the portfolio value of investment funds (NAV).
- Evaluate investment performance during the day.
- As the basis for derivative products (eg VN30 futures contracts).
- Command type used: Only ATC orders and limit orders (LO) are entered into the system during this session.
- ATC command: An order to buy or sell securities at the closing price. This order has priority over LO orders. An ATC order does not specify a specific price.
- LO command (in ATC session): Buy/sell orders at a specified price or better, will be matched at ATC price if satisfied.
- Result: At exactly 14:45, the system will determine the ATC price – the price at which the largest trading volume is executed. Appropriate ATC and LO orders will be matched at this price.
The capture What is periodic closing order matching? Very useful for investors who want to make end-of-day position closing transactions, or investment funds that need to trade at the official closing price.
Periodic Order Matching Principle
So, how does the system determine the unique matching price in the ATO and ATC sessions? Periodic order matching principle based on maximizing trading volume and prioritizing price and time. Specifically:
- Determine Order Matching Price:
- The system will compare and summarize all valid buy and sell orders (including ATO/ATC and LO orders) entered during the session.
- The strike price (ATO or ATC price) is the price at which The trading volume achieved is the largest.
- If there are multiple prices that satisfy the condition of maximum trading volume, the price identical or closest to the execution price of the most recent matching order (usually the reference price for ATO, or the last matched price of the continuous session for ATC) will be selected.
- If there are still multiple satisfactory prices, the higher price will be selected.
- Order Matching Priority Principle: Once the matching price has been determined, buy and sell orders will be matched in the following order of priority:
- Priority 1: About Price:
- Sell orders with lower prices will be executed first.
- Buy orders with higher prices will be executed first.
- ATO/ATC orders (buy or sell) are considered to have the highest price priority (ready to buy at any price higher than or equal to the match price, ready to sell at any price lower than or equal to the match price within the range). Therefore, ATO/ATC orders will be matched before LO orders at the specified match price.
- Priority 2: About Time:
- If orders have the same price, the order entered into the system first will be executed first.
- Priority 3: By Volume (Less common, mainly applied when allocating fractional shares): In some special cases where it is necessary to allocate the remaining part of the counter-order at the same price and time, the order with the larger volume may be given priority. However, the main priority is still Price and Time.
- Priority 1: About Price:
Periodic Order Matching Principle
Understanding periodic order matching principle helps investors visualize how their orders will be processed and the possibility of being matched during ATO/ATC sessions.
Example of Periodic Order Matching
To clarify the above principles, let's consider a example of periodic order matching ATO session assumption for stock XYZ (Reference price: 50.0).
Explanation of Cumulative KL:
- Cumulative Buy at price X: Total volume of ready-to-buy orders from price X and above (including ATO). For example: at 50.0, cumulative buy volume = KL(ATO) + KL(50.1) + KL(50.0) = 5k+3k+8k = 16k.
- Cumulative Sell Volume at Price X: Total volume of orders ready to sell from price X down (including ATC). For example, at 50.0, cumulative sell volume = KL(ATC) + KL(49.8) + KL(49.9) + KL(50.0) = 2k+4k+6k+7k = 19k.
- Expected Match Volume at price X: Min(Cumulative Buy Volume at X, Cumulative Sell Volume at X).
Step 2: Determine the order matching price
Looking at the “Expected Match Volume” column, we see that the largest matched volume is 16,000 at price 50.0.
So, ATO price = 50.0 and Matched volume = 16,000 shares.
Step 3: Identify matched orders
- Buyer:
- ATO Order 5,000 (Highest Priority) -> Match all 5,000.
- Order 50.1 3,000 (Price higher than 50.0) -> Match all 3,000.
- Order 50.0 8,000 (Price equal to 50.0, entered at 9:02) -> Matched all 8,000.
- Total matched buy: 5,000 + 3,000 + 8,000 = 16,000.
- Buy orders 49.9 and 49.8 were not filled because the bid price was lower than the ATO price.
- Seller:
- ATC Order 2,000 (Highest Priority) -> Match all 2,000.
- Order 49.8 4,000 (Price lower than 50.0) -> Match all 4,000.
- Order 49.9 6,000 (Price lower than 50.0) -> Matched all 6,000.
- Order 50.0 7,000 (Price equal to 50.0, entered at 9:04) -> Matched 4,000 (Because the total volume to be matched is 16,000, matched 2k+4k+6k = 12k, still missing 4k). This order has a remaining 3,000 that cannot be matched.
- Total matched sell: 2,000 + 4,000 + 6,000 + 4,000 = 16,000.
- Sell order 50.1 was not filled because the bid price was higher than the ATO price.
Example of periodic order matching This clearly illustrates how the system determines price and order allocation based on volume maximization and price/time priority.
Continuous Order Execution vs. Periodic Order Execution: Comparing the Differences
To fully understand the trading mechanism, it is important to clearly distinguish between Continuous order matching and periodic order matching is very important.The combination between Continuous order matching and periodic order matching create a complete trading session structure, ensuring both continuity and liquidity during the session, and having stops to determine important prices fairly at the beginning and end of the day. Understanding this difference helps investors choose the type of order and the time to place the order that suits their trading strategy. For example, if you want to buy/sell at any price at the opening, an ATO order is suitable. If you want to buy/sell immediately during the session, an MP order (on HNX) or LO order with the appropriate price is a better choice.
Conclude
Through this detailed analysis, we hope you have a comprehensive and in-depth view of What is periodic order matching?, including specific sessions such as ATO and ATC, periodic order matching principle, how to determine price through example of periodic order matching, as well as the fundamental differences between Continuous order matching and periodic order matching.
Mastering this mechanism is not only fundamental knowledge but also a useful tool to help investors:
- Gain insight into how the market determines key price levels.
- Place buy/sell orders more efficiently during ATO and ATC sessions.
- Build a trading strategy that suits each time of the session.
- Avoid unnecessary misunderstandings about how your orders are executed.
The stock market is always moving and contains many complex factors. Equipping yourself with solid knowledge is the first and most important step on the road to successful investment. Continue to learn, update information and if necessary, do not hesitate to seek advice from experts or reputable securities companies. Units such as HVA Always ready to provide analysis and in-depth knowledge to support investors.
