What is an Auction?
The largest and most liquid shares on the London Stock Exchange are traded on an electronic system, known as SETS, which determines the live market price of the shares throughout the trading day.
At certain points shares enter an auction period during which trading is often unavailable and the buy price is often higher than the sell price (known as backwardation).
Auctions are market wide events and will affect all brokers.
Types of auction
- Opening auction: From 7.50am – 8am to establish the opening price.
- Closing auction: From 4.30pm – 4.35pm to establish the closing price.
- Midday auction: Introduced from 21 March 2016. An auction at noon each day, expected to last around 2 minutes.
- Volatility auction: If a share experiences a significant and unexpected price movement during the trading day, the shares may enter a 5 minute auction to help reduce volatility and stabilise the share price.
- Option expiry auction: To determine prices for expiring futures and options contracts FTSE 100 securities have an expiry auction at 10:10 on the third Friday of the month and FTSE 250 securities have an expiry auction at 10:10 on the third Friday of March, June, September and December.