What is Periodic Call Auction and its timing

What is a Periodic Call Auction?

The Periodic Call Auction mechanism was introduced by SEBI Circular in 2013 to reduce excessive volatility in illiquid stocks and ensure fair price discovery. It involves a structured trading process where stocks are traded in defined auction sessions throughout the trading day.

Why Are Some Stocks Traded in This Category?

Stocks that meet specific criteria of illiquidity, as outlined in SEBI’s regulations, are moved to the Periodic Call Auction category. These criteria include:

  • Average daily number of trades: Less than 50.
  • Average daily trading volume: Less than 10,000.
  • Additional conditions specified in the SEBI circular.

Such stocks often lack sufficient market activity, making them prone to erratic price movements and manipulation. Periodic call auctions help in controlling these issues.

How Periodic Call Auctions Work

1. Session Structure:

  • The trading day is divided into six auction sessions, each lasting one hour.
  • Sessions begin at 9:30 AM and run until 3:30 PM, as per the schedule below:

  1. Order Placement:

    • Investors can place, modify, or cancel orders during the first 45 minutes of the session.
    • Market orders are initially priced at 0, similar to pre-market sessions.

  2. Order Matching:All orders received are matched in an 8-minute matching period.

  3. Buffer Period: A 7-minute buffer period follows each session, allowing for a transition to the next auction session.

Key Considerations for Trading Illiquid Stocks

  • Order Execution:

    • If your order isn’t matched in one session, it will automatically be retried in subsequent sessions throughout the day.
    • Execution depends on order matching during the session.

  • Order Restrictions:

    • IOC (Immediate or Cancel) and GTT (Good Till Triggered) orders are rejected for stocks under this category.
    • AMOs (After Market Orders) are not permitted.

Benefits of Periodic Call Auctions

  • Fair Price Discovery: Ensures prices are determined by genuine market demand and supply.
  • Reduced Volatility: Prevents sharp price movements in illiquid stocks.
  • Controlled Trading Environment: Allows better regulation and monitoring of illiquid securities.

For more detailed information, refer to the relevant BSE FAQ (PDF) and NSE Circular (WEB).


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