A stalled market occurs when bid and offer prices for a security are identical, eliminating the bid-ask spread. It can occur in both stock and futures markets due to high trading volume or payment delays. Stalled markets are temporary and do not indicate permanent damage or negative characteristics of the security. Investors typically focus on other activities until the stall is resolved.
A stalled market is a short-term situation that can occur within a market. The phenomenon occurs when the bid and offer prices associated with a given security are identical. Market conditions of this nature can occur in both a stock market and a futures market. This set of circumstances effectively eliminates any difference in the bid-ask spread between the two prices. A stalled market is more likely to occur in markets that are experiencing high trading volume, but which rarely last for any appreciable length of time.
There are several reasons why the bid price and ask price may be the same for a short period of time. The most common event has to do with the activity of the buyer and the seller in the transaction. If the initiator of the transaction has offered payment, but the other party has not yet received payment, the hold will appear and will remain in effect until payment is received. This is especially true in situations where one party has paid the brokerage involved in the transaction but that payment has not been credited to the other party’s account. Once the transfer is complete, the stuck situation is resolved and trading can continue as before.
In a futures market, a locked market can occur due to the high volume of trading activity that has occurred during the current trading day. If prices reach their daily limit, the prices of those stocks are frozen until the next trading day. During that time period, there is no difference between the bid and ask prices. Once the new day begins, any orders placed before the market officially opens are usually sufficient to re-establish the spread and trading activity picks up again.
It is important to remember that a stalled market does not mean that the market has suffered any kind of permanent damage. This type of market occurrence also does not automatically indicate any type of negative characteristic of the security involved in the lock or that a buyer or seller has engaged in activity that will create any type of disruption going on in that market. Once the circumstances that created the stalled market are resolved and the bid-offer spread re-established, the market will continue as before. For this reason, investors are usually not alarmed by a stalled market and simply focus on other investment activities until the stall is resolved.
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