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Royalty Exchange implements a hybrid “Second-Price Auction” auction format that has been specifically adjusted for our model.
- In a second item auction, the seller offers more than one identical item for sale, so that there may be more than one winning bidder. Each bidder can bid for all the items or only some of them, and publicly indicates the price that he/she is willing to pay for each item. However, all winning bidders need to pay only the lowest qualifying (successful) bid. If there are more successful bids than items available, priority goes to the bidders whose bid was highest and then to bidders who submitted their bids first.
- In the first unit price level, investors indicate how many units they wish to bid upon and confirm his/her bid (By default, the lowest price level is selected). To change the default unit price level, please click "Proxy Bid" for more options.
- Once the first unit price level is filled, all investors with bids placed can start outbidding one another for units in the "Bonus Round." The "Bonus Round" begins when all units have been bid upon at the starting price. When this happens, it triggers the "end of auction timer" compressing the time left to bid on the auction. In general, the main bar will indicate how many units you currently own and your proxy levels.
- Even if a new bid is placed on the same price level, it will still be considered a new bid.
To understand the auction bidding, here is an example:
The seller auctions 10 identical items (Starting Unit Price Level = $20).
Bidder “A” bids for 6 units at $20 each.
Bidder “B” bids for 3 units at $20 each.
Bidder “C” bids for 4 units at $21 each.
Bidder "B" bids 2 units at $21 each
The outcome of this auction would be:
Bidder “A” wins 4 units at $20 each
Bidder “B” wins 2 units at $20 each.
Bidder "C" wins 4 units at $20 each
The price is $20 because that was the lowest successful bid (hence the second price
). The difference between the “traditional” second-price auction and the Royalty Exchange auction is that Royalty Exchange will require all winning bidders to buy their final share totals regardless of the first amount of shares they offered to bid.
Auction extension: an auction can be extended for two reasons. Either, there were no bids on an auction and the seller agrees to extend the auction beyond its normal timeframe or someone places a bid within the last 5 minutes of the auction which will automatically extend the auction another 5 minutes.