What is a single price auction in the stock market? – Tejarat News
According to Tejarat News, Tehran Stock Exchange is one of the trading markets that has its own rules and conditions for trading. One of these conditions is trading auction; What is this auction and how is it done?
Transactional auction is a capital market buying and selling system where the buyer and seller agree on a specific amount regarding securities, goods or services, etc. based on this system and carry out their transactions.
Basically, auction does not mean applying discount on shares, but two stages of trading in the course of transactions. All stock and over-the-counter transactions are priced and sold using the trading auction mechanism. There are two types of auctions in the market, the first is the continuous auction and the second is the discontinuous auction.
What is a continuous auction?
In continuous auction, there is no time gap between buying and selling. In other words, in continuous auction, if a share sale order is registered, as soon as a buyer is found at that price, the share will be sold. Also, if you are a share buyer, whenever a seller is found with a buy order price, the share will be bought for the bidder.
Of course, during a continuous auction, you can delete or edit the order as long as there is no buyer or seller with an offer price to sell or buy. The continuous auction is the same as the normal trading hours in Iran Stock Exchange from Saturday to Wednesday from 9:00 am to 12:30 pm. Therefore, if a share is ever traded, the trading mechanism is a continuous auction.
Continuous auction or single price auction
In a discontinuous auction or Single price auction A transaction between the buyer and the seller is not done until the specified time. As if there is an obstacle for buying and selling orders to reach each other. This type of auction is formed to discover the price and competition between buyers and sellers (or between supply and demand).
The purpose of the continuous auction is to reach a balanced price that the buyer and seller are satisfied with and discover the competition between supply and demand.
For example, pre-opening in the stock market is a kind of continuous auction, in which the buyer and seller only register orders and no buying or selling is done.
At the end of the discontinuous auction, when the competition between the buyer and the seller reaches a common agreement, price matching is done and the discontinuous auction becomes a continuous auction. At this time, the transaction is done and supply and demand are balanced.
Therefore, the difference between continuous and discontinuous auction is when the transaction is done. In continuous auction, we first have a pre-opening stage so that supply and demand can compete with each other. At the end, with price matching, an auction is held and transactions are made.
Continuous auction time
The first situation that exists for a discontinuous auction is pre-opening. In the pre-opening, orders are registered and after the competition between the prices, they reach a certain price. Of course, due to the fluctuation range, the zero price of the board is also the same as the closing price of the previous day.
The second situation is when the share goes to the forum and a discontinuous auction is done to reopen the token. In different societies, different information is given that affect the value of the share. That is why supply and demand need to compete with each other again to discover a new price.
The third position is the disclosure of company information; Stock and over-the-counter companies are obliged to take all the important information that is effective in the company’s status in the form of information disclosure on the Kodal system. At this time, the share is closed and reopens after some time. Due to the fact that the disclosed information affects the performance of the company, the reopening requires rediscovery of the price and, consequently, a discontinuous auction.
The fourth situation is the fluctuation of more than 20 and 50% of the price. If a share fluctuates more than 20% in 5 working days, it is reopened with a discontinuous auction stage. For 20% volatility, the share will be transferred from the continuous auction to the discontinuous auction and will be reopened on the same day as a discontinuous auction with the limitation of the fluctuation range.
Difference between continuous and discontinuous auction
A discontinuous auction has an additional pre-opening phase during which no trades take place. Unlike discontinuous auction, in continuous auction, it is possible to buy and sell simultaneously and bilaterally. Also, continuous auction can be done in certain conditions without limit of fluctuation range. But the continuous auction in the Iranian stock market always has a limit in the range of fluctuations.
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