Question about BID vs ASK at the start of Day Trade

Question

So I have been monitoring this IPO recently. Day trade starts and we are allowed to post bid and asks for 30 minutes before the market officially opens.

I see asks for around 40 for 4500 shares. Lowest ask before market open. Then I see a bid for 60 for 2000 shares. Highest bid before market open.

Sample Table below:

Bid-------------------------------------Ask

60$ for 2000 shares---------------------40$ for 4500 shares

59$ for 1000 shares---------------------55$ for 1000 shares

58$ for 1500 shares---------------------54$ for 1000 shares

For example the list above is the latest as the market opens.

Will the 40$ for 4500 shares fill in the 60$, 59$ and 58$ bids? Will it be calculated as

60 x 2000 = 120000

59 x 1000 = 59000

58 x 1500 = 87000

120000 + 59000 + 87000 = 266000$

OR......

40 x 4500 = 180000$ ?

Sorry for not so good english.

Answer 1

In most exchanges, there is only single opening price during opening auction. The single price should maximize the volume transacted / minimize the imbalance of market orders.

In your case, any single price at or between $40 and $60 can equally maximize the volume of 4500 shares.

How the single price can then be determined is depedent on the exchange.

Take NYSE as an example:

Determining Core Open Auction Price

If there are multiple prices at which the Total Imbalance can equally execute, the Indicative Match Price will be based on the price closest to the Auction Reference Price, including equal to the Auction Reference Price itself when that is one of the prices available.

https://www.nyse.com/markets/nyse-arca/trading-info#core

The definition of Auction Reference Price is:

Rule 7.35C. Exchange-Facilitated Auctions

“Auction Reference Price” means: IPO or Direct Listing Auction:

A price determined under Rule 1.1(s)(1)(F)

https://nyseguide.srorules.com/rules/document?searchId=360953749&treeNodeId=csh-da-filter!WKUS-TAL-DOCS-PHC-%7B4A07B716-0F73-46CC-BAC2-43EB20902159%7D--WKUS_TAL_19401%23teid-44

Which refers to:

Rule 1.1. Definitions

For a security that is a new listing and does not have any consolidated last-sale eligible trades on its first trading day, the Official Closing Price will be based on a derived last sale associated with the price of such security before it begins trading on the Exchange.

https://nyseguide.srorules.com/rules/document?searchId=360953953&treeNodeId=csh-da-filter!WKUS-TAL-DOCS-PHC-%7B4A07B716-0F73-46CC-BAC2-43EB20902159%7D--WKUS_TAL_19401%23teid-2

Which is likely whichever price is closer to the IPO Offering Price.