Before the implementation of the revised rules, there is only one central auction for each contract on each trading day, which is the opening central auction. For contracts with continuous trading, the opening central auction is held in five (5) minutes before the continuous trading session (20:55-21:00). During the first four (4) minutes of the central auction, bids and asks are entered into the central order book, and during the last minute bids and asks are matched. For any product to which continuous trading does not apply, the opening central auction is held in five (5) minutes before the day trading session.

 

Starting from May 26, 2023, there will be an additional central auction for contracts with continuous trading in the day trading session. Each contract with continuous trading will have two central auctions if there is night trading session. Before the start of the day session (i.e. 08:55 to 08:59), clients can place and cancel orders. Unfilled orders in continuous trading of night session shall remain active for matching period (i.e. 08:59-09:00), if they are not cancelled. 

 

 

Adding central auction is a measure taken by exchanges to optimize trading mechanisms. It will promote fairer prices for the start of day trading session, while reducing the impact of commodity price fluctuations during the period from the end of the night session to the start of the day session on unfilled orders, thus being conducive for maintaining market fairness.

 

 

Adding central auction for the day trading session does not fundamentally change the definition of the opening price. According to the Trading Rules of Shanghai Futures Exchange and Trading Rules of Shanghai International Energy Exchange，the opening price is the execution price established in the opening central auction. If no trade is executed during the opening central auction, the price of the first trade executed during auction trading on the current day following the opening of the market shall be the opening price. Therefore, each contract can have at most one opening price for each trading day.

 

 

If there is no execution price generated by the opening central auction, the night session of continuous trading, and the central auction for the day trading session, the opening price will be determined by the first execution price of the subsequent continuous trading for the day trading session. If there is no transaction throughout the whole trading period, there will be no opening price for that day.

 

 

The matching logic of the central auction for the day trading session is consistent with the existing matching logic of the opening central auction. The regime of the Trade Maximization is applied to the fills achieved in the central auction session. The price established during the central auction session shall match the most bids and asks. Bids higher than or asks lower than the price generated from the central auction shall all be executed. Bids or asks at the price of the trade executed during the central auction session shall be executed up to the number of bids or asks, whichever is less. Unfilled orders in the central auction for the day trading session will automatically participate in the subsequent continuous trading.

 

 

Unfilled orders from continuous trading of night session will automatically participate in the central auction for the day trading. Also, clients can cancel their unfilled orders during the first four (4) minutes of the central auction for the day trading session.

 

 

The revision mainly involves Article 30, 32, and 34 for Trading Rules of Shanghai Futures Exchange；Article 8 for Continuous Trading Rules of Shanghai Futures Exchange；Article 19 and 22 for Trading Rules of Shanghai International Energy Exchange. The specific revisions can be found on the official websites of SHFE and INE.