Frequently Asked Questions
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Can you pay less than the strike price in a syndicate auction?
Yes you can, and this example is a good way to explain how the auction process works in detail. Suppose that two names each tender £100,000 on syndicate xyz, one of them at 5p and one at 10p. Suppose four buyers subscribe for £50,000 each at 8p, 10p, 12p and 14p respectively.
The auction proceeds as follows.
1. The 14p subscription is matched with the 5p tender. The cost is £7,000, average price so far is 14p.
2. The 12p subscription is matched with the 5p tender. The cost is £6,000, overall average price now 13p.
3. The 10p subscription matched with the 10p tender. The cost is £5,000, overall average price now is 12p.
4. The 8p subscription matched with the 10p tender. The cost is £4,000, overall average price now 11p.
5. The sellers both receive 11p, which exceeds their tender prices. The buyers all pay the prices they bid including the one who bid below the strike price of 11p.
When will more FAQs appear here?
They will be coming soon