Market auction

A market auction refers to the process where buyers and sellers place orders to buy or sell investments, with those orders matched at the best possible price. The most common types of market auction are:

• Opening auction: This happens at the market open
• Closing auction: This happens right before the market closes
• Intraday auctions: Some exchanges do these at specific times during the trading day

During these auctions:

• Buyers submit bids (what they’re willing to pay)
• Sellers submit asks (what they want to sell for)
• The exchange matches them to find a clearing price – where the most volume can be traded

Throughout periods of high volatility – for example, after a major news event or geopolitical shock – prices can swing rapidly and unpredictably.

When there is high volatility, market auctions help to find a ‘fair’ price for both buyers and sellers, concentrate trading activity to help improve the chances of completing an order, and can help stabilise prices by matching a large volume of orders at the same time.