Unlike a traditional stock exchange that trades continuously, on Catalist's markets, all trading is conducted through simple periodic auctions. This is because auctions have been shown to be the fairest mechanism for pricing financial products that do not trade very often. Periodic auctions can help improve liquidity by bundling together all orders during a fixed period.
Auctions can either set a fixed price for financial products (commonly used for capital raising) or a variable price set by supply and demand (commonly used for secondary market trading). During each variable price auction, investors will see the expected price of your financial products in real time, based on the total supply and demand from buyers and sellers, and a live order book to indicate market depth. When the auction closes, all buyers and sellers pay or receive the same fair price for your financial products.
Bids and offers from investors are given priority based on the competitiveness of their price and the time they are submitted.
Auctions can be purely for capital raising purposes, where your business is selling additional financial products to investors, or they can be for investors to trade existing financial products between themselves – or they can be both at the same time.
Auctions have several features designed to ensure there is always a fair and orderly market. Features include the types of orders allowed, as well as both automated and human monitoring of trading conduct.
If you’d like to know more about auctions, have a read of our page on how auctions work. Learn more