Liquidity

Liquidity

Ability to buy or sell a security quickly and in large volume without substantially affecting its price.

The liquidity of a security is a function of the number of shares or units in circulation and the number of market participants who are willing to buy or sell them. If a security is liquid, this means that both supply and demand are enough to ensure that a trade - another term for the simultaneous purchase and sale of a security - can take place at any time.

At FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange), so-called designated sponsors furnish additional liquidity for securities that tend to be less liquid by providing quotes at which they are willing to buy or sell the security.

The liquidity of a security is usually measured on the basis of its stock exchange turnover.