What are the benefits of the auction market to the seller and buyer?
The primary purpose for any action is price discovery.
If you tracked prices in your local shops over a long period of time, you would see they slightly tweak prices to see how this affects sales.
IE if prices are lower, the shop will make less per unit, though sell more units, higher prices will sell fewer units, though make more per unit, etc.
That’s an example of a one-way market (business to consumer or B2C), in the financial markets it's a two-way market, as everyone is both a buyer and a seller.
In financial markets prices are only ever in one of two states:
- Balanced - Buyers and sellers are happy to transact in this area;
- Imbalanced - Price is moving up or down, looking for the next balanced area where two-way trade can take place.
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