What is an auction?
Many exchanges don't simply "end the day" with the last random trade. Instead, they run an auction where buy and sell interest is pooled for a short period, then matched at one clearing price.
Why exchanges use auctions
- One official reference price: Funds, indices, and reporting often rely on a single close.
- Liquidity concentration: Pooling orders can reduce the price impact of large trades.
- Fairness: Participants with different speeds can still trade at the same auction price.
Closing auction (Europe example)
In many European markets, continuous trading stops and a closing auction process begins, generally lasting a few minutes while orders accumulate and a closing price is determined.
Closing auction (ASX example)
On the ASX, the Closing Single Price Auction (CSPA) determines the closing price via an algorithmic matching process designed to find a price that best matches demand and supply.
Practical tips
- If you place a market order right into the auction, you may get filled at the auction price, which can differ from the last traded price.
- Expect higher volume near the open/close; this is normal market microstructure, not necessarily "manipulation."