Auction Market
Barron's Finance & Investment Dictionary:
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Auction Market
system by which securities are bought and sold through brokers on the securities exchanges, as distinguished from the over-the-counter market, where trades are negotiated. Best exemplified by the new york stock exchange, it is a double auction system or two-sided market. That is because, unlike the conventional auction with one auctioneer and many buyers, here we have many sellers and many buyers. As in any auction, a price is established by competitive bidding between brokers acting as agents for buyers and sellers. That the system functions in an orderly way is the result of several trading rules: (1) The first bid or offer at a given price has priority over any other bid or offer at the same price. (2) The high bid and low offer “have the floor.” (3) A new auction begins whenever all the offers or bids at a given price are exhausted. (4) Secret transactions are prohibited. (5) Bids and offers must be made in an audible voice.
Also, the competitive bidding by which Treasury bills are sold.
See also bill; Dutch Auction.
Also, the competitive bidding by which Treasury bills are sold.
See also bill; Dutch Auction.
| Attained Age, Atm (automatic teller machine) | |
| Auction-Rate Preferred Stock, Audit |
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Auction Market
Investopedia Financial Dictionary:
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Auction Market
A market in which buyers enter competitive bids and sellers enter competitive offers at the same time. The price a stock is traded represents the highest price that a buyer is willing to pay and the lowest price that a seller is willing to sell at. Matching bids and offers are then paired together and the orders are executed.
Investopedia Says:
The New York Stock Exchange (NYSE) is an example of an auction market. Auction markets differ from over the counter where trades are negotiated. For example, 4 buyers want to buy a share of XYZ and make the following bids: $10.00, 10.02, 10.03 and $10.06. Conversely, there are 4 sellers that desire to sell XYZ and they submitted offers to sell their shares at the following prices: $10.06, 10.09, 10.12 and $10.13. In this scenario, the individuals that made bids/offers for XYZ at $10.06 will have their orders executed. All remaining orders will not immediately be executed and the current price of XYZ will then be $10.06.
Related Links:
Knowing how the primary and secondary markets work is key to understanding how stocks trade. A Look At Primary And Secondary Markets
Here are the answers to all the questions you have about stock exchanges but are too afraid to ask! Getting To Know The Stock Exchanges
Know the four main avenues of buying and selling investment instruments.
The 4 Ways To Buy And Sell Securities
Learn some of the important differences in the way they operate and the securities that trade on them. The NYSE And Nasdaq: How They Work
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Barron's Finance & Investment Dictionary
Dictionary of Finance and Investment Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
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Mentioned in
Camps
(finance term)
Award
(in banking)
Tokyo Stock Exchange (TSE)
(business term)
Dealer Market
(finance term)
Priority
(finance term)
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