Market auction

A market auction refers to the process where buyers and sellers place orders to buy or sell investments, with those orders matched at the best possible price. The most common types of market auction are:

  • Opening auction: This happens at the market open
  • Closing auction: This happens right before the market closes
  • Intraday auctions: Some exchanges do these at specific times during the trading day

During these auctions:

  • Buyers submit bids (what they’re willing to pay)
  • Sellers submit asks (what they want to sell for)
  • The exchange matches them to find a clearing price – where the most volume can be traded

Throughout periods of high volatility – for example, after a major news event or geopolitical shock – prices can swing rapidly and unpredictably.

When there is high volatility, market auctions help to find a ‘fair’ price for both buyers and sellers, concentrate trading activity to help improve the chances of completing an order, and can help stabilise prices by matching a large volume of orders at the same time.

Read more about share prices and quotes

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Popular terms

Alternative Investment Market (AIM)

The junior marketplace of the London Stock Exchange, acting as a way for small and medium-sized growth companies to access investors. There are weaker regulatory requirements for companies that want to list on the AIM compared to the Main Market, which can mean less protection for investors.

AJ Bell offers dealing within the AIM market via our investment platform.

Aquis Stock Exchange

An alternative junior marketplace to the Alternative Investment Market (AIM), offering a place for small and typically less mature companies to trade their shares. This is separate to and not owned by the London Stock Exchange.

Companies listed on the Aquis Stock Exchange tend to be at a very early stage of development with low levels of liquidity and little or no trading history, making them harder to buy or sell – and therefore a riskier investment.

AJ Bell offers dealing within the Aquis Stock Exchange via our investment platform.

Bond

A type of investment in which you lend money to a company or government. In return you get interest payments and repayment of the money you lent at the end of a specific term. The interest rate and term are set at the start of the investment.

Investing in bonds is generally considered safer than shares. But there are still risks, primarily default risk (i.e. the company or government becoming insolvent), inflation risk, and the risk that interest rates rise over time.

A bond issued by the UK government is also known as a gilt. You can buy bonds directly, as well as invest in funds that hold bonds.

See our bond offering Read more about bonds