What is an Auction Market?

Malcolm Tatum
Malcolm Tatum

An auction market is an example of buying and selling of financial instruments that takes place on the floor of an exchange, such as the New York Stock Exchange. Sometimes referred to as open outcry trading, the auction market provides a means for buyers and sellers to compete in a real time environment, with the stocks and bonds usually going to the highest bidder.

Businessman giving a thumbs-up
Businessman giving a thumbs-up

The attraction of auction markets is that the process allows for quick and swift trading. Competitive bids for available stocks and bonds can be accepted and approved immediately, since everyone on the floor of the stock exchange have to meet strict criteria in order to participate in the bidding process. As with any type of auction, these qualified participants are free to make as many bids as possible, creating a lively atmosphere. For many, this form of bidding is much more exciting than any type of online or indirect negotiations through a third party, such as in the case of over the counter markets.

While most auctions employ the use of one auctioneer, an auction market is an eclectic mix of both buyers and sellers. Sellers vie for the attention of the buyers, while buyers are also actively engaged in attracting the notice of persons who wish to purchase stocks. While this approach may appear to be unstructured to the novice, the fact is that most people who choose to participate in an open market have honed their skills to the point that they are often able to obtain the desired results. Sellers often leave with a price that is acceptable, while buyers obtain shares at a unit price that is considered to be competitive and fair.

An auction market approach to buying and selling shares of stocks also has the distinction of being a time-honored tradition. Long before the advent of any type of electronic technology to support trading, the open auction market was considered the most efficient means of building a solid stock portfolio. Even as modern telephony made it possible to obtain real time information, the concept of an auction market continued to be highly desirable. Persons who were unable to travel to an auction floor were still able to provide agents with authorization to buy and sell within certain limitations, and see the results in a very short period of time. While online trading has gained a great deal of attention over the last two decades, there is no doubt that the auction market will continue to be the preferred means of trading for many investors.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including wiseGEEK, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

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Discussion Comments


@Subway11 - I have been to art auctions before but they were on cruise ships. They are fun, but have to say that really love real estate auctions.

These are even more exciting. If you register for the auction you just need to bring your cashier’s check and it is usually for about $5,000 or so and they send you a booklet of all of the homes being auctioned and when the open houses are.

It is really a good idea to check out the homes before you buy because with these auctions, the banks own the property and they are sold as is.

Also, in the program it will note if the property is eligible for financing or not because some properties may have structural problems or in the case of a condo development may have so many foreclosures that those banks are not willing to offer financing for these properties.

Most of the properties do qualify for financing. I think that when I went to the auction, less than 5% were not eligible for financing. You can also go to the auction site online and register when one comes to your area, but you can only bid if you have a cashier's check.


@GreenWeaver -I have to say that auctions are really exciting. I went to an art auction once and it was a lot of fun.

You almost feel like you have to leave the place with something which is the only problem with auctions. You start to get caught up in the moment, but you should only buy if it is a good deal.


I love buying things on auction. I sometimes buy collectible dolls through an online auction site. These sites are great for finding obscure or rare collectible items.

These internet auctions are a win–win situation because the seller gets to unload something that they no longer want and make some money, while someone else can find something that they been searching for and the purchase can really make their day.

I know when I find something that I have been looking for a long time it is such a thrill. I always try to keep some sort of budget and hope nobody else notices what I am bidding on.

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