What is an Auction? [ Ссылка ] PLEASE LIKE, SUBSCRIBE AND SHARE THIS VIDEO SO WE CAN DO MORE! What is the opening and closing auction on the LSE? This is for SETS (Stock Exchange Electronic Trading Services). In 1997, the London Stock Exchange switched to an order-driven trading system which changed the way many FTSE 100 and FTSE 350 stocks are traded in London. AIM stocks sometimes also include order book information on a mixed SEAQ/SETS screen called SEATS.
‘SEAQ’ stands for the Stock Exchange Automated Quotation System. SEAQ is simply an electronic system publishing prices by individual market makers (market makers are market participants who set a price at which they are prepared to deal for a stock). The best bid or ask price can then be chosen by your broker. As such when you wish to make an order with a broker to buy or sell stocks, the broker doesn't need to call all the market makers individually - they just refer to the best price listed on SEAQ. The SEAQ system is used for lesser traded stocks, the bigger ones trade via SETS.
LSE Opening and Closing Auctions - How it works At 7.50am in the morning UK time people can start posting their orders for the auction (instead of the former system where a market maker would set the price). People can put in limit buy orders, limit sell orders or market orders and they show up in the order book. At 8 am the auction process ends and we get what is called an uncrossing price (UT).
The close is similar. From 4.30pm to 4.35pm the same happens and you again get an uncrossing price. Let's examine in detail what really happens in this process; at 4.30 when the market closes is the "closing auction" (if there are any potential trades left on the book), anyone at this point with Direct Market Access including joe public can enter their bids/offers for the stock, from here let's call them buys and sells, its easier. What the SETS system is trying to do is give the official closing MID price for the day's trading.
The participants have 5 minutes to enter what price they will pay for or be prepared to sell their stock for at this point, no-one is trading here, just entering. Furthermore, their entries have to be within 5% of the last AT trade of the day. If the last AT trade was at 16.5p, the range for the entries of proposed buys and sells must fall between 15.675 - 17.325p.
After 5 mins and all the entries are in, the SETS computer swings into action, and what it does is calculate from the entries the HIGHEST VOLUME trades that can be made, the MOST shares it can UNCROSS from one side of the book to the other. It is literally "matching" any trade that will trade at the prices on the book, if you see what I mean? This takes up to 30 secs above the 5 min auction.
The resultant figure becomes the UT ( uncrossing Trade) for the day and the official days closing MID price...which in our example .. 16.35.14..... 1750000 @ 17p....UT.
So the UT you see every evening at something like 16.35.+30 secs is NOT a BUY, is NOT a SELL.. but half and half, it is a Volume figure. It is recorded as a buy or sell like all trades are: a guess based on which side of the "last mid" it is.
The 17p official closing price is then taken forward to the OPENING auction at 7.50am the next day where the city johnnies do the whole auction thing again to give an opening price at 8.00am.
This order book system automates the process of transacting equities; initially by matching orders to buy and sell shares, and then by executing them to create trades. Auction can also happen during the trading day, triggered when a stock price has moved substantially.
