Auction and Dealership Markets: What is the Difference?

Publication Date
Financial Markets Group Discussion Papers DP 125
Publication Authors

In the 1980s, the practice of listing stocks in several exchanges has become more frequent, and as a result investors have gained access to alternative trading systems to exchange the same stock. For instance, French, Italian and Spanish "blue chip" stocks can now be traded in their domestic exchanges, organised as auction markets, as well as in the London SEAQ International market, which is a dealership market. The key difference is that while in auction markets all outstanding orders are transacted at a single price via a centralized mechanism, in dealership markets they are placed with individual dealers, who execute them at preset quoted prices.