Auction market

auction market

A market in which buyers and sellers gather to transact business through announced bid and ask prices. The organized securities exchanges are examples of auction markets. Compare dealer market, open outcry.

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Auction Market

A security exchange in which buyers make bids and sellers make offers in order to make transactions in a security. On an auction market, the current price for a share in a security is the highest price a buyer is willing to pay and the lowest price a seller is willing to sell. For example, if potential buyers for Security A enter bids of $50, $51, and $52, and potential sellers enter offers of $52, $53, and $54, the current share price is $52. Only the bid/offer for $52 is executed; others must make better bids and offers in order to conduct transactions. The New York Stock Exchange is a major auction market.

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Auction market. Auction market trading, sometimes known as open outcry, is the way the major exchanges, such as the New York Stock Exchange (NYSE) and the Chicago Mercantile Exchange (CME), have traditionally handled buying and selling.

Brokers acting for buyers compete against each other on the exchange floor, as brokers acting for sellers do, to get the best price. While the trading can be quite intense, it is orderly because the participants adhere to exchange rules.