I'm not -entirely- sure this is a bug, but the tooltip on the inventory says that "items in trades still take up inventory space" and "the limit per item is 999 and can't be raised" so it makes me wonder when I see apparently it is possible to store multiple stacks of 999 in the auctions at once, of the same item.
Is this unintented, or ir it simply the tooltip being a bit confusing?

The items on the auction are still taking place in your inventory, so it's not possible. The only way how it can happen is when an old player who accumulated items over the limit before the limit was introduced decides to divide them into stacks in auction.

I currently have: 113 vermillion in my inventory, and 900 sitting in auction.
The notice when buying too much vermillion also disappears for me if I put enough up for auction to "clear" the room.
(I bought the final 50 vermillion to push me past the 999 limit.)
This post I saw earlier also seems to tie into this matter.

When I saw the title of this bug thread I had a feeling my post would be included here. I did not purchase any Vermillion to push myself past the limit; I found it while exploring and the game allowed me to do so even though I had Vermillion up in the trades and, with that counted towards my total in my warehouse, I would have been over the limit while being able to collect more. I was not around before the limit was introduced and so I wonder why I could still manage to do this (although I did so unintentionally, I did not mean to exploit the trade system in any way to acquire Vermillion over the limit of what is permitted).

Oh yes - I didn't mean to imply anything about you, just that somehow, it appears the system indeed does not count items in auction towards the limit. I simply bought some because it was a quicker way to confirm I could indeed go over the limit myself than to wait for my explorers to rest up. Whether through buying or exploring, the fact it is possible at all is what concerned me when making this thread.