auction market

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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 accept. 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

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
Double auction markets are fascinating institutions.
See generally ABDOLKARIM SADRIEH, THE ALTERNATING DOUBLE AUCTION MARKET: A GAME THEORETIC AND EXPERIMENTAL INVESTIGATION 1-5 (Lecture Notes in ECON.
Copeland and Friedman [1987; 1991] provide useful background information on laboratory procedures and computerized double auction markets. Instructions for the current experiments are available on request.
To analyze the situation faced by traders as a game of incomplete information is a daunting task, particularly in the case of double auction markets (and clearinghouse markets with book [is greater than] 0) since continuous-time strategies then must be chosen.
In double auction markets, the difference between the best (lowest) ask and the best (highest) bid is recalculated every time either changes, and spread is the time-weighted average over the time when both bids and asks are present during a subperiod.(16) In some clearinghouse market clearings, there are no extramarginal bids or no extramarginal asks; in such cases spread is not defined.
Early studies of double auction markets for perishables (e.g., Smith [1982]) noted that volume often tends to be heavier late in a trading period, even though buyers and sellers in a perishables environment typically have repetitively stationary known values so that there are no news events.
The fourth conclusion regarding double auction markets contradicts available theoretical analysis (Lindsey [1990]).
DOUBLE AUCTION MARKETS DA1 NO NO 1:1 2.60 8 DA2 NO NO 1:1 6.10 8 DAX1 NO YES 2:1 7.70 11 DAX2 NO YES 2:1 4.45 11
In double auction markets, a rich public information set is generated as both buyers and sellers enter and accept publicly displayed price quotes within trading periods.
Examination of the four double auction experiments in Figure 2 reveals that our double auction markets generated price deviations of approximately the same magnitude as HLV.
This result parallels HLV's finding for double auction markets in the SMP design.
Posted offer and double auction markets do not perform identically in this design, however.