The auction is an additional market model (next to continuous trading, popular on other platforms),
which focuses on maximizing traded volume and on price stability. This is a time-tested solution
(applied by e.g.
London Stock Exchange,
Eurex,
Tokyo Securities Exchange, Osaka Derivatives Exchange, etc.)
that allows to obtain robust settlement price and to prevent cascading margin calls or market
manipulations.
During the Auction, orders are accepted, put in the order book, but not immediately
matched - instead, all matching occurs at the end of the auction. The price at which matching can occur has to be within
limits guaranteeing that no bankruptcy occurs.
The auction algorithm works as follows:
- For each price, the potentially traded volume is calculated. Trade volume is the lesser value of
the two: cumulative buy volume and cumulative sell volume, for a given price.
- The price maximizing traded volume is selected as the Theoretical Auction Price.
- If the price is not unique, a price with the minimum absolute difference between cumulative buy
volume and cumulative sell volume is selected. If the price is still not unique, a price closest
to the last price is selected.
After 5 minutes, the auction ends and the last Theoretical Auction Price is set as the Auction
Price, and orders are matched at that price. All orders with a price better than the Auction Price
will be matched in full, orders exactly at the Auction Price will be matched according to time
priority.