ARS Reporting Requirements
Dutch auctions are conducted by agents of the issuer, called auction agents. Orders by auction participants are submitted to the auction agent by eligible dealers, called program dealers. Program dealers sign an agreement with either the issuer or the auction agent, giving them the right to submit orders, either on behalf of their customers or for their own accounts.
Orders at an auction come in one of three types. Current owners of the security may submit a hold order, indicating the amount of the security it wishes to keep, no matter what the clearing rate set by the auction turns out to be. Alternatively, the holder of a security may submit a sell order, indicating a desire to sell a specified amount without regard to price. The third type of order is a bid. A bid indicates the amount of the security that a holder wishes to keep or a buyer wishes to acquire at or above a specified clearing rate.
Example: Suppose two securities holders at an auction each own certificates valued at $10,000 and two bidders wish to buy that amount. Holder A issues a sell order. She will sell her bonds at any price. Holder B submits a bid at 3%. He will sell his securities if the clearing rate is 3% or higher. Buyers C and D submit bids of 2.5% and 2.9%, respectively. They will buy at that price or lower.
After all the bids are counted, the clearing rate settles at 2.85%. How do our four participants make out?
Holder B was not going to sell at any price below 3%. So he will continue to hold. Buyer C was not willing to buy at a price higher th