- A market which allows quick and efficient entry or exit at a price close to the last traded price. The ability to liquidate or establish a position quickly is due to a large number of traders willing to buy and sell. The CENTER ONLINE Futures Glossary————Both the capacity and the perceived capacity to meet all obligations whenever due and to take advantage of business opportunities important to the future of the enterprise. The capacity and the perceived ability to meet known near-term and projected long-term funding commitments while supporting selective business expansion. American Banker Glossary————A high level of trading activity, allowing buying and selling with minimum price disturbance. Also, a market characterized by the ability to buy and sell with relative ease. Antithesis of illiquidity. Bloomberg Financial Dictionary————A condition that describes the depth of market orders. A liquid market is able to accept large orders to buy or sell a commodity, with little change to the current price; ease of entry into, and exit from, the market. Chicago Mercantile Exchange Glossary————The level of trading volume in a market. Exchange Handbook Glossary————Liquidity describes the ease with which an asset can be converted into cash immediately. A liquid market is one where there are many buyers and seller and it is easy to sell your investments. For example, the shares on the FTSE 100 index are very liquid while shares on the Alternative Investment Market are not. Financial Services Glossary————The ability to buy or sell a large number of units of a financial asset in a short period without significantly affecting the price of the instrument. LIFFE————The ease with which a security can be traded on the market, usually defined by turnover. London Stock Exchange Glossary————A security is said to be liquid when investors can easily buy and sell the security, as a result of an abundance of buyers and sellers. NYSE Euronext Glossary
* * *liquidity li‧quid‧i‧ty [lɪˈkwɪdti] noun [uncountable]1. ECONOMICS the amount of money in an economy at a particular time:
• The central bank injected liquidity into the economy (= increased liquidity ) last month when it began repurchasing government bonds.— see also money supply2. FINANCE when investments can easily be bought and sold on a particular financial market:
• As investors learned in the last stock market crash, liquidity can disappear quickly when everyone tries to sell at once.3. FINANCE ACCOUNTING the ability of a company to make payments to employees and suppliers, interest payments to banks etc:
• Disappointing sales and resulting losses have caused liquidity problems.4. BANKING the ability of a bank to pay back people and organizations that have put money in the bank and that want to take their money out:
• Customers began withdrawing deposits, causing difficulties for the liquidity of the bank.
* * *The ease with which financial instruments can be traded on a market and turned into cash. Markets or instruments are described as being liquid, and having depth or liquidity, if there are enough buyers and sellers to absorb sudden shifts in supply and demand without price distortions. The opposite of illiquid. The term can also be used loosely to describe cash flow in a business, so a company that has fallen into a liquidity trap may have growing orders and production but has run out of cash.► See also Illiquid.
* * *liquidity UK US /lɪˈkwɪdɪti/ noun [U]► ACCOUNTING, FINANCE the fact of being able to be changed into cash easily: »
the liquidity of assets/investments► ACCOUNTING, FINANCE the state of having enough money or assets to pay any money that is owed: »
The business no longer has sufficient liquidity to meet its operational needs.► (also market liquidity) FINANCE, STOCK MARKET the ability to buy or sell easily on a market, for example a market in shares or bonds: »
They were forced to intervene, in order to maintain the liquidity of the market.
Financial and business terms. 2012.