The Exchange uses two different matching algorithms, depending on the trading
periods. In the opening and closing period of trading, deals are made according
to the equilibrium price algorithm, while in the free period, the dealing algorithm
for continuous matching is applied.
Equilibrium price algorithm
The most important element of this algorithm is that on the basis of orders collected
into the Order Book in a predetermined period, that price shall be the transaction
price, that is, the opening or closing price of that security, at which the largest
volume of buy and sell orders meet, i.e. the largest volume of securities can
change hands.
The algorithm examines the orders in the Order Book in 5 steps and determines
one single price for the deals.
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In the Order Book of a security, the price levels selected where there is an
overlap between the buy and sell orders and the largest quantity of securities
can change hands. If there is such a price level, this will be the one determined
as execution price.
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If there are several prices in the book at which identical quantities of securities
are sold and bought, then, in accordance with the algorithm, the software finds
the price level at which the largest quantity can be traded, but the smallest
is the so-called dropout quantity, i.e. the securities quantity that cannot change
hands after the transactions, because there is no sufficient quantity, offered
for purchase or sale on the other side.
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If there are several prices in the Order Book at which not only the transactable,
but also the dropout quantities are identical, however dropout quantities are
only on sell side (there is a pressure on the sell side in the Order Book), then
the lowest price among price levels shall be determined as execution price. If
dropout quantities are only on buy side (there is a pressure on the buy side in
the Order Book), then the highest price among price levels shall be determined
as execution price.
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If there are several prices in the Order Book at which not only the transactable,
but also the dropout quantities are identical, further, buy and also sell quantities
in excess can be detected on these price levels, or there is no dropout quantity
at all, then, the arithmetical average of these prices shall be determined as
an execution price.
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If this arithmetical average does not fall under a value corresponding to the
tick of the given security, it shall be rounded up to a reference price, which
is the closing price of that security for the previous day. If no such price exists,
a rounding down to the next tick shall take place.
Examples for equilibrium price algorithm
Continuous order matching algorithm
According to the continuous order matching algorithm, if an order that arrives
in the Order Book can be transacted with an order on the other side which fulfils
all conditions, the transaction is immediately concluded. The transaction price
will be always the price of the order that entered the system earlier in time.
If, in an order, the whole of the quantity is not transacted, the outstanding
quantity remains in the Order Book and when an appropriate order is entered from
the other side, it shall be transacted. If this fails, then the order is automatically
withdrawn upon the expiry of the time-line set in the order.
Examples for continuous trade matching algorithm
