Why an auction at all?
At the start of the day many orders have piled up since yesterday's close, and at the end the closing price is what the stock is valued at for many purposes, such as portfolio values. Instead of letting the first order to arrive set the price alone, the exchange gathers all the orders and finds one price that represents them.
The opening auction is the discovery session from 9:30, closing at a random moment between 9:50 and 10:00. The closing auction runs from 14:15 to 14:25, and it too closes at a random moment near its end. After it come 5 minutes in which trades happen only at the closing price.
How is the price found?
The system tries every possible price and asks: if everyone dealt at this price, how many shares would trade? A buyer with a higher limit is happy to pay less, and a seller with a lower limit is happy to receive more. The price that lets the largest quantity trade wins.
| Price | Buyers at this price or higher | Sellers at this price or lower | Can trade |
|---|---|---|---|
| 9.90 | 14,000 | 3,000 | 3,000 |
| 10.00 | 9,000 | 6,000 | 6,000 |
| 10.10 | 5,000 | 10,000 | 5,000 |
| 10.20 | 2,000 | 16,000 | 2,000 |
Everything that trades does so at 10.00, including the buyer whose limit was 10.20. If two prices tie on quantity, the system has further rules to break the tie, such as the price that leaves the least unfilled.
The price you see during the auction
Follow the auction live
The auction page shows both auction windows and a countdown, and the indicative price for live-data subscribers.
Check yourself
1. In the example, why is the auction price 10.00 and not 10.10?
2. Your buy limit was 10.20 and it filled in the auction. What do you pay per share?
Summary
- An auction collects orders without trading, then fills them all at one price.
- The winning price is the one that lets the most shares trade.
- The price during the auction is indicative until the random close.