DEFINITION of 'Commoditization'

1. A situation when illiquid financial contracts are changed or modified in a way that promotes trading and results in a more liquid market.

2. Making a product into a commodity.

BREAKING DOWN 'Commoditization'

1. While many consider this sort of adjustment worthwhile, some view commoditization as a cause of price fluctuations.

2. When a product becomes indistinguishable from others like it and consumers buy on price alone, it becomes a commodity.

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