Periodic Call Auction

The Secondary Market Advisory Committee (SMAC), recommended the introduction of trading through

periodic call auction mechanism for illiquid scrips in the equity market extending the call auction mechanism in pre-open session

to all scrips.

Periodic Call Auction for Illiquid scrips

2.1. Trading in illiquid scrips in the equity market shall be conducted only through periodic call auction sessions.

2.2. Criteria for illiquidity

a) For the purpose of this circular, a scrip which trades in the normal market  and  is  not  shifted  to  trade  for  trade  settlement, shall  be classified as illiquid on a stock exchange if the following conditions are met

1. Average  daily  turnover  of  less  than  Rs.2  lakhs  calculated  for previous two quarters and
2. The  scrip  is  classified  as  illiquid  at  all  exchanges  where  it  is traded

b) Of the scrips identified as per above criteria, scrips which satisfy any of the following conditions shall be excluded.

1. Scrips with average market capitalization more than Rs.10Cr.  
2. Scrips where company is paying dividend in at least two out of last three years.
3. Scrips where  company is profitable in at least 2 out of last 3 years, and not more than 20% of promoters shareholding is pledged in the latest quarter and book value is 3 times or more than the face value

2.3. Entry into periodic call auction mechanism – Stock exchanges shall identify illiquid scrips at the beginning of every quarter and move such scrips to periodic call auction mechanism. 

2.4. Exit from periodic call auction mechanism – Stock exchanges shall move scrips from periodic call auction mechanism to normal trading session if the following criteria are met: 

2.4.1. The  scrip  has  remained  in  periodic  call  auction  for  at  least  one quarter.

2.4.2   It is not classified as illiquid as per para 2.2 

2.5. Notice to market – For entry and exit of scrips in the call auction mechanism, a notice of two trading days shall be given to the market.

2.6. Number of auction sessions – Periodic call auction sessions of one hour each shall be conducted throughout the trading hours with the first session starting at 9:30am.  Stock Exchange may determine the number of call auction session for illiquid stocks. However in order have minimum trading sessions and uniform closing session, there shall be at least 2 sessions in a trading day with one uniform closing session across the exchanges."

2.7. Session duration - The call auction session duration shall be one hour, of which 45 minutes shall be allowed for order entry, order modification and order cancellation, 8 minutes shall be for order matching and trade confirmation and remaining 7 minutes shall be a buffer period for closing the current session and facilitating the transition to next session. The session shall close randomly during last one minute of order entry between the 44th & 45th minute. Such random closure shall be system driven.

2.8. Un-matched orders- The orders may remain valid throughout the trading day and un-matched orders remaining at the end of a call auction session may be moved into next call auction session." 

2.9. Price band – A maximum price band of 20% shall be applicable on the scrips through the day. Exchanges may reduce the price bands uniformly based on surveillance related concerns. 

2.10. Circuit Breaker - If the Market wide Index Circuit Breaker gets triggered at any time during the periodic call auction session, the session shall be cancelled and all orders shall be purged. The periodic call auction session shall be resumed at the nearest half hour after the normal market resumes. 

2.11. Penalty for certain trades - In the event where maximum of buy price entered by a client (on PAN basis) is equal to or higher than the minimum sell price entered by that client and if the same results into trades, a penalty shall be imposed on such trades. The penalty shall be calculated and charged by the exchange and collected from trading members on a daily basis. Trading members may recover such penalty from clients. The penalty so collected shall be deposited to Investor Protection Fund. Penalty for each such instance per session will be higher of the following:

a. 0.50% of the trade value for sale and 0.50% of trade value for the buy, resulting in 1% penalty for the client on PAN basis. OR b. 2500 /- for the buy trade and 2500 /- for the sell trade, resulting in penalty of 5000/- for the client on PAN Basis.

2.12. All other conditions for trading in periodic call auction sessions shall be as per the circulars CIR/MRD/DP/21/2010 dated July15, 2010, CIR/MRD/DP/27/2010 dated August 27, 2010 and CIR/MRD/DP/32/2010 September 17, 2010.

3. Pre-Open Call Auction Session  

3.1. In partial modification of SEBI circular no CIR/MRD/DP/21/2010 dated July 15, 2010, pre-open call auction session shall be applicable to all exchanges with active trading and for all scrips that are not classified as illiquid as per para 2.2 above.

3.2. Price bands in pre-open session shall be as applicable in the normal market.

 3.3. All orders shall be checked for margin sufficiency at order level for inclusion in pre-open session.

1. 4. All other conditions for pre-open call auction session shall be as per circulars CIR/MRD/DP/21/2010 dated July15, 2010, CIR/MRD/DP/27/2010 dated August 27, 2010 and CIR/MRD/DP/32/2010 September 17, 2010.

List of Circulars pertaining to Periodic Call Auction