In this post, we would like to bring you through one auction cycle to help in understanding how the token auction mechanics work. The diagram above gives an overview of the 3 different auction stages.
In session n, consider the following submitted orders in order.
From the table, the aggregated demand is 6000 units and supply is 7000 units. When sorted by ascending order for price and cumulative demand and supply, the table will be as follows.
These sorted orders can also be plotted into a discrete graph to depict the overall demand and supply.
Assume the externally obtained settlement price is 0.45. From the chart, all bid orders that are equal or above this settlement price will be matched with ask orders that are equal or below this closing price. However, given that the settlement price may not be the equilibrium price of the bid/ask orders, this may not result in maximum executed quantity. In this case, the bid orders that should be filled are C and D which make up a total quantity of 2500. The ask orders to be filled, on the other hand, would be E, G, H, I and K which make up a total quantity of 6000. Supply is evidently higher than demand at this settlement price. Hence, bid orders C and D would be filled by ask orders E, H, I with E having a partial fill of 1000 units at the price of 0.45 while ask orders G and K would remain unfilled. Note that price priority have precedence then time priority is taken into account if the price are the same. The rest of the orders will remain unfilled. All matched quantities will be executed at the settlement price.
The table above shows a summary of the order settlements.
We hope this gives you a better understanding of our Token Auction mechanics!
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