Investments, tenth edition

  

Auction Markets

    The most integrated market is an    auction  market,    in which all 

traders converge at one place (either physically or “electronically”) to buy or sell an 

asset. The New York Stock Exchange (NYSE) is an example of an auction market. An 

advantage of auction markets over dealer markets is that one need not search across 

dealers to find the best price for a good. If all participants converge, they can arrive at 

mutually agreeable prices and save the bid–ask spread. 

 Notice that both over-the-counter dealer markets and stock exchanges are secondary 

markets. They are organized for investors to trade existing securities among themselves.