The Latest BTS2 System: How the Stock Quotes Work

I notice that a lot of people are still confused with the way the Theoretical Opening Price (TOP) and Theoretical Closing Price (TCP) are determined under the new Bursa Trade Securities 2 (BTS2) platform, so here’s an article explaining in detail how the new system works.

The way TOP/ TCP is determined remains the same, actually; what has changed is the way the orders submitted by every market participants are displayed on the screen. Overseas trading platform has been using the new display format for years and our local exchange is merely catching up with the developed markets. Let’s look at a hypothetical scenario so that you could better understand the quotes displayed under the new BTS2 platform.

Assuming that there are only 5 market participants who are interested in trading share ABC, namely V, W, X, Y, and Z. The previous closing price for share ABC is RM1.20 and the orders submitted by V, W, X, Y, Z are as followed:-

- V queues to buy 300 lots at each price from RM1.18 to RM1.20.
– W queues to sell 200 lots at each price from RM1.20 to RM1.23.
– X is bullish on shares ABC and is willing to offer a higher price just to be sure that he can get some shares at the opening. He queues to buy 350 lots at RM1.22.
– Y is bearish on share ABC and is willing to sell 180 lots of his shares at RM1.19 and therefore queue accordingly.

This is how the orders are displayed under both the new BTS2 platform and the old system:

Scenario 1 - Preopening

How do we determine the TOP under the new BTS2 system? We simply knock off the lowest ask (sell) price with the highest bid (buy) price until the highest bid price is lower than the lowest ask price. The price of which the last knock-off is done will be the TOP. In this example (look at the quotes for the new BTS2 system above), the sell order of 180 lots at RM1.19 is knock off against the buy order of 350 lots at RM1.22, leaving a buy order of 170 lots at RM1.22. Then we knock off the remaining 170 lots against the 200 lots sell order at RM1.20, leaving a sell order of 30 lots  at RM1.20. The remaining sell order of 30 lots will then be knocked off against the buy order of 300 lots at RM1.20, leaving 270 lots of buy order at RM1.20. The knock-off stops here as the highest bid price is now lower than the lowest ask price (RM1.20 against RM1.21). Since the last knock off was done at RM1.20, the TOP is at RM1.20 and all transactions will be done at RM1.20 at the opening.

- V would get 30 lots of share ABC at RM1.20, and has 270 lots queueing to buy.
- X would get 350 lots of share ABC at RM1.20.
- W would sell his 200 lots of share ABC at RM1.20.
- Y would sell 180 ot of share ABC at RM1.20.

X has priority over V in acquiring the share at TOP because X is willing to offer a higher bid price. This is how the quotes look like at the opening:

Scenario 1 - Opening

Under the previous system, all bids on and above the TOP will be sum up and display as a buy order at TOP while all asks on and below the TOP will be sum up and display as a sell order during the pre-opening session (refer to the first image above).

As you can see, the new BTS2 platform is deemed more transparent as it discloses the volume AND PRICE of every order submitted to the exchange instead of just lumping them up at the Theoretical Opening Price under the previous system. Such transparency is deemed important for certain traders to assess (1) the likelihood of his position being matched and (2) the bullishness or bearishness of other market participants. The way the orders are displayed during the pre-closing session is the same as the pre-opening session.

If you are further confused by the explanation above on how the TOP is determined, don’t worry as your online trading platform would provide you with the TOP/ TCP (under the column T-O) on a real-time basis during the pre-opening session. There is no need to calculate the TOP/ TCP yourself.

If you are looking for more examples, here are a few:

SCENARIO 2:

- Previous closing price of share ABC is RM1.20.
– V queues to buy 300 lots at each price from RM1.18 to RM1.20.
– W queues to sell his stocks at 200 lots at each price from RM1.20 to RM1.23.
– X is bullish on shares ABC and is willing to offer a higher price just to be sure that he can get some shares at the opening. He queues to buy 500 lots at RM1.22.
– Y is bearish on share ABC and is willing to sell 100 lots of his shares at RM1.18 and therefore queue accordingly.
– Z is also bearish on share ABC and queue to sell 50 lots of his shares at RM1.19.

Scenario 2 - Preopening
Theoretical Opening Price is at RM1.21. At the opening,
- V would get nothing.
- X would get 500 lots of share ABC at RM1.21.
– W would sell 350 lots of share ABC at RM1.21 with a remainder of 50 lots queueing to sell at RM1.21.
- Y would sell 100 lots of share ABC at RM1.21.
- Z would sell 50 lots of share ABC at RM1.21.

Scenario 2 - Opening
SCENARIO 3:

- Previous closing price of share ABC is RM1.20.
- V queues to buy 300 lots at each price from RM1.18 to RM1.20.
- W queues to sell his stocks at 200 lots at each price from RM1.21 to RM1.24.
- X is bullish on shares ABC and is willing to offer a higher price just to be sure that he can get some shares at the opening. He queues to buy 1000 lots at RM1.25.
- Y is bearish on share ABC and is willing to sell 350 lots of his shares at RM1.15 and therefore queue accordingly.
- Z is also bearish on share ABC and queue to sell 70 lots of his shares at RM1.19.

Scenario 3 - Preopening
Theoretical Opening Price is at RM1.23. At the opening,
- V would get nothing.
- X would get 1000 lots of share ABC at RM1.23.
- W would sell his 580 lots of share ABC at RM1.23 with a remainder of 20 lots queueing to sell at RM1.23.
- Y would sell his 350 lots of shares at RM1.23.
- Z would sell his 70 lots of shares at RM1.23.

Scenario 3 - Opening

SCENARIO 4:

- Previous closing price of share ABC is RM1.20.
- V queues to buy 100 lots at each price from RM1.18 to RM1.20.
- W queues to sell his stocks at 200 lots at each price from RM1.21 to RM1.24.
- X is bullish on shares ABC and is willing to offer a higher price just to be sure that he can get some shares at the opening. He queues to buy 220 lots at RM1.23.
- Y is bearish on share ABC and is willing to sell 550 lots of his shares at RM1.15 and therefore queue accordingly.
- Z is also bearish on share ABC and queue to sell 80 lots of his shares at RM1.19.

Scenario 4 - Preopening
Theoretical Opening Price is at RM1.15. At the opening,
- V would get 300 lots of share ABC at RM1.15.
- X would get 220 lots of share ABC at RM1.15.
- Y would sell his 520 lots of share ABC at RM1.15 with a remainder of 30 lots queueing to sell at RM1.15.

Scenario 4 - Opening

If you find this article helpful, share it out with your friends so that they could understand how the latest stock quotes work! =)

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