What Is a Call Auction?

A call auction, or call market, is where market participants place orders to buy or sell at certain bid or offered (ask) prices, which are then batched together and♌ matched at predetermined time intervals. Orders collected during a call auction are all executed at the price that forms the best over🤡all match. Call auction rules may vary by exchange.

Understanding Call Auctions

In the securities market, a call auction replaces the method of continuously 澳洲幸运5开奖号码历史查询:matching orders. Buyers set a maximum price at which they will buy the shares and sellers ꧙set a minimum price at whi𒅌ch they are willing to sell the shares. 

Most major stock markets open and close trading with a call auction, while a conti🍬nuous market for trading operates the rest of the day. Call auctions batch orders together to create large multilateral trades in which buyers and sellers arrive at a single price.

In a traditional call auction, an auctioneer "calls" out to solicit buy and sell orders for a security and then groups them for execution at specified times during a trading day. The auctioneer's job is to best match the supply and demand of a security to arrive at a 澳洲幸运5开奖号码历史查询:clearing price.

All 澳洲幸运5开奖号码历史查询:market orders for purchase and sale will be executed at that clearing price. The auctioneer will execute 澳洲幸运5开奖号码历史查询:limit orders to buy a🐠t the clearing price or below and lim𝓀it orders to sell at the clearing price or above.

Benefits of a Call Auction

An electronic call auction clears buy and sell orders for a given asset at predetermined points in time. By bunching many transactions together, a call market increases liquidity and can significantly decrease transaction costs for participants. As an alternative market structure, call auctions impact order flow and handling decisions, price discovery, and 澳洲幸运5开奖号码历史查询:market transparency.

Orders batched into call auctions are “priced” orders, meaning all orders are limit orders; there are no market orders involved. By contrast, in continuous trading, limit orders on﷽ly trade at their limit prices when the market prices trigger the limit.

In the call auction, however, prices can improve for everyone. For instance, a buy order in a call may list $20.50 as the maximum price to pay but actually execute at $20.40. A seller, meanwhile, may have had the lowest price limit of $20.30, but 𓂃receive $20.40 in the call auction.

Call Auctions vs. Continuous Trading

In a continuous trading market, traders can trade at any time when the market is open. Buyers and sellers continuously place their orders and are matched on a continuous basis. ♋Most markets that we see today, including the stock exchanges, derivatives exchanges, and the forex market, are continuous trading markets.

In a call auction, trades are instead executed according to an 澳洲幸运5开奖号码历史查询:order-driven system. They use single-price auctions that match the orders of buyers and sellers and then a single trading price is chosen that will maximize volume.

Both types of markets have their own advantages and disadvantages. The biggest advantage of a call auction is that it provides 澳洲幸运5开奖号码历史查询:high liquidityꦜ as all traders interested in a security have to make their trades at the same time and place. Continuous markets, meanwhile, give traders the flexibility to make their trades whenever they want.

Example of a Call Auction

A call auction is initiated in an illiquid stock to be traded at 1:00 p.m. EST. The stock's 澳洲幸运5开奖号码历史查询:specialist gathers the followi🌄ng buy and sell ord𓆏ers beforehand:

• Buy 50 shares at $885
• Buy 75 shares at $875
• Buy 100 shares at $870
• Sell 100 shares at $870
• Sell 75 shares at $880
• Sell 50 shares at $890

The best match is dec🅺ided at $870 per share. This is the call price thatꦺ is executed for all orders that have been batched together at that moment.