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. Acquisition

    A corporate action in which a company buys most, if not all, ...
  6. International Finance Corporation

    The International Finance Corporation is an organization dedicated ...
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. How To Invest In The Nikkei 225
    Mutual Funds & ETFs

    How To Invest In The Nikkei 225

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center