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. Round Trip Transaction Costs

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

    The direct and indirect costs associated with the execution of ...
  3. Transaction Costs

    Expenses incurred when buying or selling securities. Transaction ...
  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. Personal Finance

    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. Investing

    How Do Real Estate Agents Get Paid?

    Here's how real estate commissions on home sales really work. And, yes, they're negotiable.
  5. Investing

    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.
  6. 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.
  7. Investing

    4 Dishonest Broker Tactics And How To Avoid Them

    Protecting yourself from dishonest broker practices means knowing how to spot them.
  8. Trading

    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.
  9. Investing

    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.
  10. Trading

    How To Pay Your Forex Broker

    Three types of commissions are used in this market. Learn how to get the best deal.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
Hot Definitions
  1. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  2. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  3. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  4. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  5. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  6. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
Trading Center