Frictionless Market

DEFINITION of 'Frictionless Market'

A theoretical trading environment where all costs and restraints associated with transactions are non-existent.

BREAKING DOWN 'Frictionless Market'

The advent of discount brokers and their low commissions has brought the market closer to a frictionless state. But, in reality there are no truly frictionless markets since trading is always associated with certain costs or restraints, such as commissions and tax implications.

RELATED TERMS
  1. Transaction Costs

    Expenses incurred when buying or selling securities. Transaction ...
  2. Round Trip Transaction Costs

    All costs associated with opening and closing a financial or ...
  3. Friction Cost

    The direct and indirect costs associated with the execution of ...
  4. Arbitrage-Free Valuation

    1. The theoretical future price of a security or commodity based ...
  5. May Day

    Refers to May 1, 1975, when brokerages changed from a fixed commission ...
  6. Stretch Annuity

    An annuity option where tax-deferred allowances are passed on ...
Related Articles
  1. Investing

    What Are Transaction Costs?

    Transaction costs are expenses incurred from buying or selling securities.
  2. Financial Advisor

    How Does Commission Work?

    A commission is the charge that brokers or investment advisors assess in exchange for their services.
  3. Investing

    Why Use a Discount Broker?

    A discount broker is a stockbroker that does not offer clients investment advice, but trades shares for a smaller commission than a full-service broker.
  4. Trading

    How Brokerage Fees Work

    What you need to know about fees when choosing between a full service and discount broker.
  5. Investing

    How Do Real Estate Agents Get Paid?

    Here's how real estate commissions on home sales really work. And, yes, they're negotiable.
  6. Personal Finance

    How Real Estate Agents Get Paid

    Most real estate agents are paid a percentage of the property’s selling price, which is called a commission.
  7. Financial Advisor

    How Brokers Are Compensated for Selling Bonds

    Find out how brokers are paid for selling bonds and how the transaction costs are passed on to the investor through a markup or commission.
  8. Financial Advisor

    4 Dishonest Broker Tactics And How To Avoid Them

    Protecting yourself from dishonest broker practices means knowing how to spot them.
  9. Managing Wealth

    Brokerage Reviews: TradeStation Vs. Interactive Brokers

    These are among the most sophisticated brokers in the industry in terms of investment offerings, market access and technology.
  10. Trading

    How To Choose The Right Online Trading Broker

    The online broker market is becoming more competitive, but differences exist in services that can help traders choose the broker that’s right for them.
RELATED FAQS
  1. What are the fees associated with opening a brokerage account?

    I'm a new investor looking to open a brokerage account. I was wondering if I have to worry about any other service charges ... Read Answer >>
  2. How much will it cost me to become a casual investor on my own?

    Understanding the costs associated with becoming a casual investor is important if you want to be successful. It is important ... Read Answer >>
  3. How much money do I need to start trading?

  4. What are the different types of costs in cost accounting?

    Learn about the different types of costs associated with cost accounting, such as direct, indirect, fixed, variable and operating ... Read Answer >>
  5. How can I prevent commissions and fees from eating up my trading profits?

    First off, understand that there is no universal system regarding trading commissions charged by brokerage firms. Some charge ... Read Answer >>
  6. Why is PPP (purchasing power parity) controversial?

    Find out why economists disagree about the conceptual validity of the theory of purchasing power parity (PPP) to describe ... Read Answer >>
Hot Definitions
  1. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  2. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  3. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  4. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  5. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  6. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
Trading Center