Smart Market

AAA

DEFINITION of 'Smart Market'

A type of auction in which transactions are made to and from a pool of participants rather than bilaterally between one buyer and one seller. Smart markets are designed to reduce transaction costs and the effect of externalities, and are monitored by a market manager.

INVESTOPEDIA EXPLAINS 'Smart Market'

Smart markets have been made possible by improvements to technology, as the calculations in their deployment can be complex. Participation in a smart market often requires the payment of an upfront fee as well as a per-unit bid. For example, the use of a smart market in electricity pricing has computers review the bids of power distributors to determine how much electricity to supply compared to the overall capacity of transmission lines. Calculations determine how much each power generator should generate, the transmission lines that will transfer power from the generators to the distributor and how much power each distributor will process.

RELATED TERMS
  1. Bidding War

    A situation where two or more buyers are so interested in an ...
  2. Reverse Auction

    A type of auction in which sellers bid for the prices at which ...
  3. Dutch Auction

    1. A public offering auction structure in which the price of ...
  4. Auction

    A system where potential buyers place competitive bids on assets ...
  5. Bidder

    The party offering to buy an asset from a seller at a specific ...
  6. Cash-And-Carry Trade

    A trading strategy in which an investor buys a long position ...
Related Articles
  1. A Look At Primary And Secondary Markets
    Investing Basics

    A Look At Primary And Secondary Markets

  2. The NYSE And Nasdaq: How They Work
    Options & Futures

    The NYSE And Nasdaq: How They Work

  3. The Fed's New Tools For Manipulating ...
    Bonds & Fixed Income

    The Fed's New Tools For Manipulating ...

  4. War's Influence On Wall Street
    Bonds & Fixed Income

    War's Influence On Wall Street

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center