Dutch Auction

Definition:

A public offering auction structure in which the price of the offering is set after taking in all bids and determining the highest price at which the total offering can be sold. Investors place a bid for the amount they are willing to buy in terms of quantity and price. The United States Department of the Treasury, through the Federal Reserve Bank of New York, raises funds for the US Government using a Dutch Auction.

Also refers to an auction in which the price on an item is lowered until it gets a bid. The first bid made is the winning bid and results in a sale, assuming the price is above the reserve price (i.e., the seller’s minimum acceptable price).

See also Modified Dutch Auction.

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