There are many terms in the capital market, two of which are known as online auctions and discontinuous auctions.
In the following, we will explain more about the details and application of online and offline auctions in the stock exchange.
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In the stock market, continuous and discontinuous auctions do not mean discounting stocks, but represent two stages of trading.
The use of online and offline auctions is related to the number of shareholders and the power of liquidity.
Ongoing auction means that the price of a share must match the orders entered about it in trading systems. This trading method and understanding its continuity can help you make important financial decisions.
Buying and selling in the online auction stage is such that the transaction is done as soon as the buyer’s price matches the seller’s price.
For example, if you place an order to buy a symbol during a certain period of trading hours, ie between 9 a.m. and 12:30 p.m. If the sales order is registered, the transaction will be done.
Therefore, it can be said that the time of starting trading is known as continuous auction
Whenever a transaction is made between the buyer and the seller, it indicates that the bid price is the price agreed by both parties.
tip! The price in the continuous auction is determined according to the discontinuous auction and the price of this auction is completely legal and in accordance with the current prices.
Content
1 Definition of Auction:
1.1 Reasons for price discovery with discontinuous auction
1.2 Are online and offline auctions different in the stock market or over-the-counter?
1.3 How do we know if a stock has a continuous or discontinuous auction period?
1.4 What happens if a price is not discovered in a discontinuous auction?
1.5 What is the impact of online or offline auction on fundamental and technical analysis?
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Definition of Auction:
The auction is about half an hour before the start of market trading. At this stage, also known as pre-opening, shareholders only register their order. No sales will be made at this time.
During the pre-opening time, from 8:30 to 9, it is possible to enter, change or delete the order, and the time is before the start of trading. No transaction is made at this time.
During the discontinuous auction on the stock exchange and over-the-counter, only the stock is placed in the ordering stage, and then, after the start of the matching stage, when the buyer’s bid price equals the seller’s bid price, a transaction takes place, which leads to price discovery.
After the pre-opening stage, the transaction will take place from 9 o’clock if the buyer’s price is the same as the seller’s price.
Reasons for price discovery with discontinuous auction
- Disclosure of information
If the entity’s information is in group A, the reopening will be by auction without fluctuation restrictions, and if it is in group B, it will be with fluctuation restrictions.
- Oscillation law 50%
If, according to this law, the trading symbol is stopped, it will be reopened for a maximum of 2 working days with a limited range of fluctuations and discontinuous auctions.
- Holding a general assembly
Annual or extraordinary general meetings may be held to approve financial statements or raise capital, in which case the auction will fluctuate without restriction. But if the purpose is to hold an assembly, the auction will have limited volatility.
- Suspected of manipulation
In this case, the stock exchange organization can stop trading the company symbol while announcing it to the public. The reopening of the trading symbol after the necessary checks will be done by discontinuous auction with fluctuation range limitation.
- Transactions
If the price of a share is on the price ceiling or floor in 5 consecutive working days, a trading knot has occurred. In this case, according to Article 28, the continuous auction is held in the range of 2 times the daily fluctuation range of the normal price of the symbol to prevent the knot and locking of the buying queue or the selling queue.
Are online and offline auctions different in the stock market or over-the-counter?
- No, they are not different, the only difference is in the amplitude of the oscillation.
How do we know if a stock is online or offline?
- Take a look at the watchdog announcements per share that are published in each share trading board. Usually after the stop of each trading symbol and moments before the opening of the symbol, the announcement of the supervisor of each symbol is published and the details of the auction are published continuously or intermittently.
What happens if the price is not discovered in the discontinuous auction?
- The transaction may not take place due to the mismatch between the bidder and seller bid prices in the discontinuous auction. Or the transactions may not be approved by the Exchange and Securities Organization for any reason
In such cases, the shareholders will be notified. This step will then be repeated. This may be done in the same trading session or in the first 90 minutes of the next trading day.
The second auction may not reveal the price. In this case, there is no news of an auction for the third time. Therefore, the last closing price of the symbol will determine the zero price of the board during the continuous auction period.
What is the impact of online or offline auction on fundamental and technical analysis?
- This auction usually has no significant effect on the value of the stock and the fundamental or technical analysis of the stock. The stock is usually auctioned regularly or continuously throughout the year. Real and long-term shareholders, based on the analysis of Kedal reports and future profit factor, buy a share and have it in the portfolio, until the share reaches the target and the loss limit is not activated, there is no need to sell or fear a continuous or discontinuous auction.
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