Auction

Continuous trading matches each incoming order against whatever is resting. An auction suspends that. Orders accumulate over a call phase during which an indicative price is published but nothing executes, and at the end of the phase one price is calculated and every order that can trade at it does so, all at that same price. The end of the phase is usually randomised by a few seconds so that no participant can act on the final state of the book.

The price is chosen by a published rule rather than negotiated: the exchange selects the price at which the greatest quantity can be matched, and where two prices would match the same quantity, further published rules decide, typically by the smaller residual imbalance and then by proximity to the last traded price. That makes the outcome reproducible from the order book, which is why the closing auction can be used as an official price.

That official status is why auctions carry so much volume. Index calculations, fund valuations and settlement obligations reference the closing price, so participants who need that price must trade in the auction that produces it. For a contract written on a listed share the relevant consequence is different: while an auction runs there is no continuous two way price to reference, so providers commonly stand aside from the opening and closing phases, and the difference between one session's closing price and the next session's opening price is auction output rather than a jump in continuous trading.