UK Accounting Glossary
An active market is a market that routinely experiences high transaction volumes. There is usually a small spread between bid and ask prices, since there are so many buyers and sellers who are interested in trading.
A market for assets of a particular class in which transactions occur often and in relatively high volumes.
This concept is important in fair value accounting.
If there is no active market, then up-to-date pricing information may potentially be scarce and it will accordingly be inappropriate to value an asset by marking to market. In such examples, an asset may need to be valued using a recognised pricing model (perhaps marking to model).
Assets for which there is rarely an active market may include customised or complex derivative products.
In finance, An Active Market is a market in which there are frequent and large volumes of transactions.
Many investors are interested in active markets because they can be traded, even in rather large quantities, without affecting the price. Securities within active markets usually have low bid-ask spreads.
Poland is the most active market in Central Europe.
These factors created a more active market in foreign exchange and facilitated the use of the GBP£ for financing balance of payments purposes.
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Definitions for Active Market are sourced/syndicated and enhanced from:
This glossary post was last updated: 27th January 2019.