What is periodic call auction & why are some stocks traded in this category?

A periodic call auction is a type of trading mechanism that is used for certain stocks, usually those enhanced surveillance. This type of auction is different from continuous auction, which is the more common type of trading used for most stocks. With a periodic call auction, there are specific times throughout the day when orders can be placed and executed. This allows more orderly trading, as it gives market participants time to assess the price and make decisions about their orders. Stocks are typically placed in a periodic call auction when they are under enhanced surveillance because of concerns about potential manipulation or other market irregularities.

SEBI introduced periodic call auctions in 2013 to reduce volatility in illiquid stocks. This SEBI circular explains stocks that meet the illiquidity criteria, such as an average daily number of trades of less than 50, a daily trading volume of less than 10,000, and a variety of other conditions.

There will be six 1-hour call auction sessions held each day beginning at 9.30 a.m. The trading window for call auctions is similar to the pre-market session for equity stocks. There will be a 45-minute window for placing, modifying, and cancelling orders. Within the next 8 minutes, all orders are accepted and matched, and trades are confirmed. Before the next call auction session, there will be a 7-minute buffer period.

Click here for more info and BSE circular.

If the goal is to buy or sell such illiquid stocks that are subject to periodic call auctions, orders must be placed within the first 45 minutes, and the client will be able to buy or sell based on whether the order matches within the next 8 minutes.