source<\/a>]<\/p>\n<\/div>\nGenerally speaking, instruments traded on big exchanges enjoy the highest liquidity. On the other hand, instruments traded on dark or less-developed markets tend to be more illiquid. The NYSE is many times more liquid than the Stockholm Stock Exchange, for example. Most traders consider liquidity a reflection of the market\u2019s health.<\/p>\n<\/p>\n
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In a liquid market, a seller will quickly find a buyer without having to cut the price of the asset to make it attractive. And conversely a buyer won\u2019t have to pay an increased amount to secure the asset they want. Market liquidity impacts everything from the bid-offer spread to trade execution. That\u2019s why it\u2019s important to have a firm understanding of what the term means, and which markets are liquid and illiquid. Securities that are traded over the counter (OTC), such as certain complex derivatives, are often quite illiquid.<\/p>\n<\/p>\n