liquidity provisions

Liquidity provision refers to the availability of cash or easily tradable assets in a market. It ensures that buyers and sellers can quickly exchange assets without causing significant price changes. In finance, liquidity providers, such as banks or trading firms, supply this cash or assets, helping to stabilize markets. When there’s high liquidity, transactions can occur smoothly, making it easier to buy or sell investments. Conversely, low liquidity can lead to price volatility and difficulty in making trades, which can be problematic for investors and the overall economy.