Definition
Call Auction
A call auction collects orders over a period and matches them all at a single price that maximises the volume traded, instead of matching continuously.
Unlike continuous trading, a call auction pools all buy and sell orders and finds one clearing price where the most shares can change hands. India uses it in the pre-open session and for periodic price discovery in illiquid stocks.
SEBI mandates a periodic call auction for illiquid scrips (typically a few times a day) to give them fairer price discovery and curb manipulation in thinly traded shares. The single-price mechanism reduces the impact of order timing.
Related terms
- Pre-Open SessionThe pre-open session is a short window before regular trading begins, during which orders are collected and a single opening price is established through a call auction to absorb overnight information.
- Trade-to-Trade (T2T) SegmentThe trade-to-trade segment requires that every transaction in a listed security result in compulsory delivery, prohibiting intraday netting or speculation in that stock.
- LiquidityLiquidity is how easily an asset can be bought or sold quickly without significantly moving its price.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.