Double Auction System

Double auction system

A market consisting of many sellers and many buyers, as opposed to a conventional auction with one market maker and many buyers.

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Double Auction System

A system on a security exchange in which buyers make bids and sellers make offers in order to conduct transactions in a security. In a double auction system, 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 offer. 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 double auction market. A double auction system is also called an auction market.