Auction exchanges are platforms where buyers and sellers come together to trade financial instruments, commodities, or other assets through a bidding process. Unlike continuous trading markets, where transactions can occur at any time during trading hours, auction exchanges have specific times when the auction takes place. The price is determined through an open outcry or electronic system where participants submit their bids and offers.

In a traditional open outcry system, traders physically gather on the trading floor and shout their bids and offers. The highest bid and the lowest offer are matched to execute trades. Electronic auction exchanges, on the other hand, use computerized systems to collect bids and offers, match them, and determine the transaction price. These systems enhance transparency, efficiency, and accessibility, allowing a broader range of participants to engage in the market.

The auction process ensures price discovery and liquidity, as it aggregates the supply and demand information from all participants to arrive at a market-clearing price. Examples of auction exchanges include the New York Stock Exchange (NYSE), which conducts an opening and closing auction to establish the prices of securities at the start and end of the trading day, and various government bond auctions where prices of bonds are determined based on submitted bids.

Auction exchanges are crucial for setting fair market prices and providing a centralized venue for trading, contributing to the overall stability and efficiency of financial markets.