What is a Batch Auction?
A batch auction is a trading mechanism that aggregates multiple buy and sell orders over a set time period before executing them simultaneously at a single clearing price. This method aims to improve price discovery and reduce the impact of market manipulation.
How Batch Auctions Work
- Collection Period: Orders are collected for a specified timeframe
- Price Discovery: Optimal clearing price is calculated based on collected orders
- Simultaneous Execution: All matched orders execute at the same price
- Unmatched Orders: Remaining orders may roll over to next batch
Advantages
- Reduced Manipulation: Harder to influence prices through small trades
- Fair Price Discovery: Better reflects true market demand
- Lower Volatility: Minimizes price impact of large orders
- Improved Liquidity: Concentrates trading activity
Use Cases
- Market Opening/Closing: Determining opening/closing prices
- Low-Liquidity Assets: Improving price discovery for illiquid assets
- Large Orders: Executing significant positions with minimal impact
- New Token Listings: Initial price discovery for new assets
Related Terms
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