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What is auction system in stock market? How AUCTION works?

Wednesday, December 22, 2010 | | |


In day-to-day life trader faces so many problem. They are not aware common words and an action of market. So they become cause of anxiety and worry. Also they have to run to ask someone other. Mostly they are preferred to ask to their broking house. I found that over time rather than ask to authority person they are asking to bolt operator. They deliver the answer as per their knowledge. Some answers are satisfying them, some not. I try to provide such term and action in detailed, not in technical manner but in understanding manner. So one can easily understood those terms, words, and actions while they are playing in market.

Auction System is one of the confusing terms for most of trader. Do you ever encounter problem of auction? Do you credit some money in your account instead of delivery of stock? Or you may face short sell on upper circuit, this may cause in unable to deliver stock to buyer of stock. If you are doesn’t know auction system, this will cause to run away for ask to broker. This could raise your heart rate high.

What is auction in stock market?
An ACUTION is procedure done after trader fail to delver stock or partially deliver stock to buyer. Suppose you sold 100 stocks CAIRN ENERGY, but you don’t have 100 stocks in your D-mat account. You have only 60 in your account. So there is auction of 40 or you may not have even 100 of CAIRN ENRGY. In such case there is auction of 100. This is protect interest of buyer of CARIN ENERGY

There is auction period in market. If the there is no buying of stock in auction period, then position will be square-off as per guideline of SEBI. So buyer/seller gets whether stock or benefit of stock from market. In auction transaction is squared-off at highest price of stipulated time or 20% above the last closing price. Difference between buying and selling deducted from defaulter trader and credited to beneficiaries. So in most cases you may observer that there is some money credited to your account when deliveries of stock not getting to you. There could be both BUY and SELL typed of auction are done in market.

These cases of auction are normally occurring in low volume stock, where volatility is very high due to higher speculation. If you are buyer and you don’t get delivery of stock, then just follow up of it. You should entitle to either get delivery of those stock or difference of buying or auction price. So don’t confuse. Call your broker and ask them relevant question.

I hope do you understand the concept. I think this is enough explanation for auction. If you have queries regarding that ask your broker or me. This is not actual procedure of auction. I try to provide you outer line,” How to auction works?” You can ask me any other term concept, which you didn’t understand or know. I will try to solve them my level of best. You should post your queries in comment section.

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