The Stock Market: An Auction Market

An auction market is a market in which buyers submit competitive bids while sellers simultaneously submit competitive offers. The stock market is an auction market as it leverages this process to enable swift trading with the stock price representing the highest price a buyer will pay and the lowest price a seller will sell. In contrast, the over-the-counter (OTC) market works through price negotiations.

Unlike auctions, which typically employ a single auctioneer to manage the transaction process, an auction market creates a dynamic environment between buyers and sellers. For New York Stock Exchange (NYSE) traded stocks, the buying and selling is transacted on the exchange floor, creating a real-time setting in which securities usually go to the highest bidder.

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The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

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