What is the clearing bid in a Dutch auction tender?

In a Dutch auction tender, the clearing bid refers to the accepted bid price at which all successful participants in the auction can purchase the securities being offered. This auction process typically involves bidders submitting their bids for a specified quantity of an asset. The auction begins at a high price that gradually decreases until a sufficient number of securities are sold.

As the bidding price drops, interested buyers can accept the current price at which the auction is being conducted. The accepted bid price becomes the price for all buyers who participated at that level, regardless of whether they initially bid higher. This ensures fairness among bidders, as everyone pays the same price for the securities, typically the highest price at which the total offering can still be sold.

This concept is distinct from other aspects of bidding, such as the final bid received or the highest bidder's offer, which do not necessarily indicate the price at which transactions are executed in a Dutch auction. Additionally, the lowest prevailing bid does not apply here, as it does not represent the accepted bid price that the issuer agrees to honor for all bidders. Thus, the accepted bid price truly encapsulates the concept of the clearing bid in a Dutch auction.