Exchange rate determination mechanism: The survey countries with periodic foreign exchange auctions were
evenly divided between single-price and multiple-price auctions.
2/
In single or uniform price auctions, all
winning bidders pay the same market clearing exchange rate, while in multiple-price auctions, all winning
bidders pay their winning bids.
Acceptable bids: In most countries, the bids were only allowed on a competitive basis, meaning that all bids
were considered in making the pricing and allocation decisions. In noncompetitive bids, some participants may
be allowed to buy at a representative rate exchange rate computed from successful competitive bids. About half
of the countries restricted the number of bids per bidder and auction participation required minimum bid
amounts in all countries, but one.
Frequency: The frequency of periodic foreign exchange auctions in the sample varied significantly across
countries. Most periodic auctions were not conducted on a regular schedule. However, daily auctions took place
in four countries and weekly auctions in one. In Colombia, the auctions to buy foreign exchange could take
place every month, while those to sell foreign exchange took place in response to a trigger event
Other rules: In several countries, bidders were required to document the domestic currency cover for the bid to
be valid, to minimize settlement risk. The reasons for disqualification were often detailed in writing.
__________________________
1/ Bartolini and Cottarelli (1994) discuss the pros and cons of specific auction rules for government securities.
2/ The term “Dutch auction” should be avoided because it is an ambiguous term: It denotes multiple-price auctions under the
French practice but single-price auctions under English practice.
In some countries, foreign exchange regulations prohibit the operation of an interdealer
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