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Call Auction

A call auction is a method of matching buyers and sellers in financial markets by collecting all buy and sell orders over a period of time and executing them at a single price. Unlike continuous trading, where trades are executed as soon as orders are placed, call auctions accumulate orders and determine the market-clearing price at specific intervals. This method is often used at the opening and closing of stock exchanges or in markets with low liquidity.

Example

Before the stock market opens, a call auction might be held to gather all buy and sell orders for a particular stock. The auction determines the opening price based on the highest volume of matched orders.

Key points

• A call auction accumulates buy and sell orders and executes them at a single market-clearing price.

• Commonly used at the opening or closing of stock exchanges to determine prices.

• Helps reduce volatility and establish a fair market price.

Quick Answers to Curious Questions

In a call auction, orders are accumulated and executed at a single price at a specific time, while in continuous trading, orders are executed as they are placed.

They are often used at the opening or closing of stock exchanges or in markets with lower liquidity to determine prices and reduce volatility.

It helps establish a fair market price by matching buy and sell orders in bulk, reducing price volatility.