0Auction :
Auctions are initiated by the Exchange on behalf of trading members for settlement related reasons. The main reasons are Shortages, Bad Deliveries and Objections. There are three types of participants in the auction market.
(a) Initiator: The party who initiates the auction process is called an initiator.
(b) Competitor: The party who enters on the same side as of the initiator is called a competitor.
(c) Solicitor: The party who enters on the opposite side as of the initiator is called a solicitor.
The trading members can participate in the Exchange initiated auctions by entering orders as a solicitor. E.g. If the Exchange conducts a Buy-In auction, the trading members entering sell orders are called solicitors.
When the auction starts, the competitor period for that auction also starts. Competitor period is the period during which competitor order entries are allowed. Competitor orders are the orders which compete with the initiator’s order i.e. if the initiator’s order is a buy order, then all the buy orders for that auction other than the initiator’s order are competitor orders. And if the initiator order is a sell order then all the sell orders for that auction other than the initiators order are competitor orders. After the competitor period ends, the solicitor period for that auction starts. Solicitor period is the period during which solicitor order entries are allowed.
Solicitor orders are the orders which are opposite to the initiator order i.e. if the initiator order is a buy order, then all the sell orders for that auction are solicitor orders and if the initiator order is a sell order, then all the buy orders for that auction are solicitor orders.
After the solicitor period, order matching takes place. The system calculates trading price for the auction and all possible trades for the auction are generated at the calculated trading price. After this the auction is said to be complete. Competitor period and solicitor period for any auction are set by the Exchange.
Note : Price of the securities and can be 20% higher on the day high / low.
Time taken : Exchange required T+3 days time to settled the auction.
Can we stop / avoid the Auction : Yes we can avoid it, if we have share in another demat account that can be transfered by Delivery Instruction Slip (DIS) from one account to another.
