Liquidity
In very broad terms, liquidity refers to the ability to convert assets into cash.
However, Planning our electric future: a White Paper for secure, affordable and low-carbon electricity, Glossary, published by the Department of Energy & Climate Change on 14 July 2011, defines liquidity as: '...the proportion of energy trading, or the number of buyer and sellers willing to trade, in the market. Liquidity enables companies to quickly buy or sell a product without causing a significant change in its price and without incurring significant transaction costs. A liquid market is one in which market participants have confidence in traded prices. This in turn informs investment decisions and can help facilitate new entry.'
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