The ease with which an object or possesion can be turned into liquid wealth.

Liquidity in a securities market means how easy it is to do a trade there. A market is said to liquid if it is possible to sell a large amount of securities quickly without affecting the price much, and illiquid if selling large amounts is hard (takes a lot of time or change the price a lot).

A market participant is said to add liquidity to the market when posting a new limit order that is not filled immediately, and is said remove liquidity when taking a previous limit order.

Market participants that add liquidity on both sides of the market (posting buy and sell limit orders at the same time) are called market makers.

Li*quid"i*ty (?), n. [L. liquiditas, fr. liquidus liquid: cf. F. liquidit'e.]

The state or quality of being liquid.

<-- (Finance) the quality of being readily convertible to cash. -->


© Webster 1913.

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