A new cohort of bidders
While auction houses operate based on traditions going back hundreds of years, allowing fractional bidding is a brand new experience, so what does it feel like and how does the partnership between aShareX and an auction house work?
This article explains how fractional bidding works from the auctioneer’s point of view.
Things to think about when adding fractional bidders to an auction:
- What are the account creation and registration processes?
- How do bidders register advanced bids (pre-bidding and absentee bidding)?
- How does the live auction work and what information is available to the auctioneer?
- What happens post-sale when the fractional bidders win?
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Taking each of these in turn:
Account Creation and Registration Process
During account creation, aShareX carries out a KYC(Know Your Customer) check, and defines a spending limit based on a users’ financial circumstances. At this point users can be full or fractional bidders.
A user can either register to bid as a fractional or full bidder. Fractional bidders sign the SEC regulated documentation, and both groups sign the auction rules defined by the auction house. The registration process is all done online and only need take 2-3 minutes.
Bidding in advance
When a full bidder registers an absentee bid with aShareX, we share this with the auctioneer. When a fractional bidder enters a pre-bid, it is consolidated with other pre-bids and shared with the auctioneer, both for price levels where pre-bids fill the price point, and for subsequent levels so that the auctioneer can judge the enthusiasm from fractional bidders. The key to a smooth auction is effective communication between aShareX and the auction house.
The live auction
Once bidding on a lot starts, the process can be remarkably similar to every other auction, with aShareX effectively being just another paddle in the room. The auctioneer decides where he wants to start bidding and progresses through the house’s price levels. aShareX raises its paddle whenever fractional bidders fill a level and the auctioneer accepts that bid as they would any other. The aShareX team keeps fractional bidders informed of progress. One added advantage of having fractional bidders is that the auctioneer can see how “full” of fractional bidders the current level is and can see the buying power of the present fractional bidders in real time. This will help the auctioneer decide whether to keep pushing for more bids, halve the increment, or to hammer.
Post sale management
Following a successful auction, if a full bidder wins, the auction house handles payment and delivery as with any other sale. If fractional bidders win, aShareX handles payments; and when complete, handles SEC regulated processes around share distribution and pays the auction house for onward payment to the consignor.
Conclusion
The aShareX system is specifically designed to blend in with existing auction house processes to minimize disruption of the normal operation of auctions with information sharing ensuring an effective partnership.
Auction House benefits
Benefits to the auction house are many and varied, but essentially come down to reducing risk through more pre-sale exposure, more bids, more engagement with existing and new customers, and fewer high-value passed lots
Please drop me an e-mail (kevin@asharex.com) if you have any questions, or for a demo of our fractional bidding system.
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