Auction markets, such as the New York Stock Exchange, allow for fast and competitive trading of financial instruments, with stocks and bonds going to the highest bidder. This approach has been a time-honored tradition and remains the preferred means of trading for many investors.
An auction market is an example of the buying and selling of financial instruments that take place on the trading floor of an exchange, such as the New York Stock Exchange. Sometimes called the open market, the auction market provides a means for buyers and sellers to compete in a real-time environment, with stocks and bonds generally going to the highest bidder.
The attraction of auction markets is that the process allows for fast and quick trades. Competitive bids for available stocks and bonds can be accepted and approved immediately, as all stock exchange participants must meet strict criteria to participate in the bidding process. As with any type of auction, these qualified participants are free to place as many bids as possible, creating a lively atmosphere. For many, this form of bidding is much more interesting than any kind of online or indirect trading through third parties, as in the case of over-the-counter markets.
While most auctions employ the use of an auctioneer, an auction marketplace is an eclectic mix of buyers and sellers. Sellers vie for the attention of buyers, while buyers are also actively engaged in attracting the attention of people who want to buy stocks. While this approach seems unstructured for the beginner, the fact is that most people who choose to participate in an open market have honed their skills to the point where they can get the results they want. Sellers usually leave with an acceptable price, while buyers obtain shares at a unit price that is considered competitive and fair.
An auction market approach to buying and selling stocks also has the distinction of being a time-honored tradition. Long before the advent of any kind of electronic technology to support trading, the open auction market was considered the most efficient means of building a solid stock portfolio. Even with modern telephony making it possible to obtain information in real time, the auction market concept remained highly desirable. People who were unable to travel to the auction were still able to provide agents with authorization to buy and sell within certain limitations and see results in a very short period of time. While online trading has gained a lot of attention over the past two decades, there is no doubt that the auction market will remain the preferred means of trading for many investors.
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