What is auction market preferred stock?
Auction market preferred stock is a type of preferred stock that pays dividends at rates set through auctions run by an independent auction agent. Typically, shares trade hands and dividend rates are reset through auctions held every seven or 28 days. An auction is governed by a set of procedures established by the closed-end fund and its auction agent. Typically, investors submit bids and sell orders through a broker-dealer, who, in turn, submits them to an auction agent. Auctions may have a single broker-dealer or multiple broker-dealers, who may submit bids or sell orders for their own account and on behalf of customers wishing to purchase or sell the securities. Bids are filled to the extent shares are available, and sell orders are filled to the extent there are bids. All filled bids receive dividends at the new set dividend rate.
