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Finance Dictionary and Glossary of Investment Terms
Dutch auction
Definition 1.
A type of auction in which the price on an item is lowered until it gets its first bid and is sold at that price. The Treasury auction is a Dutch auction.
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Definition 2.
Auction in which the lowest price necessary to sell the entire offering becomes the price at which all securities offered are sold. This technique has been used in Treasury auctions. Often used in risk arbitrage. The price of an item (stock) is gradually lowered until it elicits a responsive bid (government T-bills) or offer (corporate repurchase) and is sold. In a corporate repurchase, the company sets a range of prices within which shareholders are invited to tender their shares. The tender offer is open for a specific period of time (i.e., 20 days), and the quantity of stock to be purchased is stated as well, subject to prorating if more shares are tendered than can be legally purchased under the stated terms (often an additional amount equal to 20% of outstanding shares can be purchased). Compare to double auction system.
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Definition 3.
An auction where the price on an item is lowered until it gets its first bid, and then the item is sold at that price.
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