How the auction works
One fair price, set in the open — with everyone’s orders kept private.
Locke’s secondary market isn’t a stock exchange with a constantly-moving price. It’s a periodic sealed-bid auction. This page explains how it works — in plain terms first, with the deeper methodology underneath.
What kind of auction this is
Locke’s secondary market runs as a periodic sealed-bid auction. Instead of a constantly-moving stock-exchange price, buyers and sellers privately submit their orders during an open window. No one sees anyone else’s order. When the window closes, the auction finds the single fair price at which the most units can change hands — and every transfer happens at that one price.
That single price is called the clearing price. You don’t need to guess it — you just tell us the most you’d pay (or the least you’d accept), and the auction does the rest.
The five things to know
- You set your own limit. A buyer names the most they’ll pay; a seller names the least they’ll accept (your “reserve”). You’re never matched beyond your own limit.
- Every transfer happens at one price. When the auction clears, all transfers happen at the single clearing price — not at each person’s individual bid. Bidding higher doesn’t mean you pay more; it makes it more likely you’re included.
- Orders are private. No one sees other participants’ orders — not during the auction, and not after. Only the final clearing price and total volume are published.
- If there isn’t enough to fill everyone, fills are shared proportionally. At the clearing price, if there are more units wanted than available (or vice-versa), the excess side is filled pro-rata — in proportion to order size — so no one is arbitrarily favored.
- Unfilled orders expire — they don’t roll over. If your order isn’t matched this cycle, it ends, and we tell you. You decide fresh next time (your reserve from last month shouldn’t bind you when the market may have moved).
A worked example you can follow
Suppose four orders come in for the same fund during one auction window:
| Order | Side | Units | Their limit |
|---|---|---|---|
| Seller A | Sell | 1,000,000 | will accept $0.90 or more |
| Seller B | Sell | 600,000 | will accept $0.95 or more |
| Buyer C | Buy | 900,000 | will pay up to $1.00 |
| Buyer D | Buy | 800,000 | will pay up to $0.94 |
The auction looks for the price that lets the most units change hands. At $0.90: Seller A (1,000,000) is willing, but Seller B is not (B wants $0.95). On the buy side, both C and D are willing at $0.90. So 1,000,000 units can change hands — the most of any price. $0.90 is the clearing price.
Now every transfer happens at $0.90:
- Seller A sells all 1,000,000 units at $0.90 — their limit was met.
- Seller B sells nothing — B’s reserve ($0.95) was above the clearing price, so B is simply left out (and never sells below their reserve).
- Buyers C and D together wanted 1,700,000 units but only 1,000,000 are available, so the buy side is shared pro-rata: C (the larger order) gets ~529,412 units; D gets ~470,588. Both pay $0.90.
The key idea: A higher bid doesn’t win you a better price — it wins you a better chance of being included. Everyone included pays the same fair clearing price.
“Why didn’t my order fill?”
If you’re a seller and nothing sold
Your reserve was above the clearing price. The auction never sells below the price you set — so rather than give you a worse price, it left your order out. Your order has expired; you can set a new reserve next cycle.
If you’re a buyer and nothing filled
The clearing price landed above the most you were willing to pay, so your order didn’t transact. It has expired — you can bid again next cycle.
If you only got part of your order
At the clearing price there were more units wanted than available on your side, so fills were shared proportionally to order size. You received your pro-rata share at the clearing price; the unfilled remainder has expired (it doesn’t roll over).
If you used an “all-or-none” order
You asked to fill completely or not at all. There weren’t enough units to fill you in full at the clearing price, so your order was set aside rather than partially filled — exactly as you requested.
If the auction didn’t clear at all
Too few units matched this cycle for a fair, reliable price, so no transfers were made and no price was published — a safeguard against a misleading price on very thin volume. All orders expired; you can participate again next cycle.
Go deeper: the methodology
For the reader who wants rigor — and for meetings. Plainer than the strategy doc, but precise.
Show the methodologyexpand
Why a uniform price?
A single clearing price for everyone removes the incentive to ‘game’ your bid. You can bid your true value: bidding a little higher only improves your chance of being included — it never raises the price you actually pay. This is why sealed uniform-price auctions are considered fair and hard to manipulate.
How the clearing price is chosen.
Among all possible prices, the auction picks the one where the most units can change hands — where buyer demand and seller supply cross. If two prices tie on volume, deterministic rules pick one (the more balanced, then the lower), so the outcome is always reproducible.
Pro-rata, precisely.
When one side has more units than the other at the clearing price, each order on the heavier side is filled in proportion to its size, in whole units, with a fixed rule for the leftover unit — so the same orders always produce the same fills.
Reserves protect sellers.
Your sell limit is a hard floor; you will never transact below it. The flip side is that a reserve set above the clearing price means you don’t sell this cycle.
All-or-none orders.
An all-or-none order fills completely or not at all. If it can’t be filled in full at the clearing price, it’s set aside and the auction re-clears without it — protecting you from an unwanted partial position.
Safeguards on thin markets.
If too little volume matches, the auction won’t clear — protecting everyone from a misleading price set by a tiny amount of activity. (A further price-band safeguard exists and can be switched on as transfer activity becomes more frequent.)
What’s published.
After a successful auction, only the clearing price and total volume become public — the market’s reference mark. Individual orders stay private permanently.
Quick reference
- Clearing price
- The single price the auction settles on — every transfer happens here, regardless of the participant's own bid.
- Sealed-bid
- Orders are private; no one sees another participant's order, during or after the auction.
- Uniform price
- One price for all transfers in a cycle — not pay-as-bid.
- Reserve (sell limit)
- The least a seller will accept. A hard floor — you never sell below it.
- Limit (buy)
- The most a buyer will pay. You're never matched above it.
- Pro-rata
- When a side is oversubscribed at the clearing price, fills are shared in proportion to order size.
- All-or-none (AON)
- An order that fills in full or not at all — set aside rather than partially filled.
- Expire-and-notify
- Unfilled orders and remainders end at the close of the cycle and you're notified — nothing rolls over.
- Published mark
- After a successful clear, the price + total volume become the public reference mark.
- No-clear
- If too little volume matches, the cycle doesn't clear and no price is published — a thin-market safeguard.
Examples use hypothetical units and prices to illustrate the mechanics. Nothing here is a performance figure, a quote, or investment advice — it explains how the auction works.