DEFINITION of 'Locked Market'

A market in which a stock's bid and ask prices are identical. In a locked market, there is no bid-ask spread; normally, there is a difference between the highest price a buyer will pay for a security and the lowest price a seller will accept. Locked markets are unusual and typically short-lived.

BREAKING DOWN 'Locked Market'

In a locked market, it may be necessary for exchanges to halt automatic order execution and implement manual order execution because executing orders in a locked market is prohibited. Securities and Exchange Commission regulations require national exchanges to not even display quotes that indicate a locked market. The SEC considers a locked market to violate fair and orderly market rules, which requires that buyers and sellers receive the next and best available prices when trading securities.

RELATED TERMS
  1. Lock Limit

    Commonly associated with the futures market, a lock limit occurs ...
  2. Loan Lock

    The securing of a specified interest rate on a mortgage that ...
  3. Mortgage Rate Lock Deposit

    A fee that a lender charges a borrower that allows the borrower ...
  4. Mortgage Rate Lock Float Down

    A mortgage rate lock with the option to reduce the locked interest ...
  5. Mortgage Rate Lock

    An agreement between a borrower and a lender that allows the ...
  6. Treasury Lock

    A hedging tool used to manage interest-rate risk by effectively ...
Related Articles
  1. Personal Finance

    Got a Good Mortgage Rate? Lock It Up!

    Rising rates mean rising profits for lenders, providing incentive to increase rates whenever possible.
  2. Investing

    Levels Of Security For Investments

    The simple analogy of different kinds of bicycle locks can teach us a lot about investments.
  3. Investing

    Negotiating the Bid

    A bid is an offer investors make to buy a security.
  4. Trading

    The Basics Of The Bid-Ask Spread

    The bid-ask spread is essentially a negotiation in progress. To be successful, traders must be willing to take a stand and walk away in the bid-ask process through limit orders.
  5. Investing

    How To Calculate The Bid-Ask Spread

    It's very important for every investor to learn how to calculate the bid-ask spread and factor this figure when making investment decisions.
  6. Investing

    How Bid Price Affects Liquidity

    The bid price is the amount a buyer will pay for a security.
  7. Investing

    What Does Bid And Asked Mean?

    Bid and asked is a two-way price quotation.
  8. Investing

    Explaining Market Orders

    A market order is the most common order used to purchase a financial security.
  9. Trading

    How To Lock In An Exchange Rate

    Currency risk can be effectively hedged by locking in an exchange rate through the use of currency futures, forwards, options, or exchange-traded funds.
  10. Investing

    10 Ways to Profit From an Interest Rate Increase

    Discover 10 possible ways that individual investors and businesses can potentially profit from an environment of rising interest rates.
RELATED FAQS
  1. What does the variance between the bid and ask price of a stock mean?

    Find out how stocks are traded in the market, why the bid and ask prices are different and why the bid-ask spread is smallest ... Read Answer >>
  2. What are the determinants of a stock's bid-ask spread?

    Stock exchanges are set up to assist brokers and other specialists in coordinating bid and ask prices. The bid price is the ... Read Answer >>
  3. What's the difference between bid-ask spread and bid-ask bounce?

    Understand the difference between the bid-ask spread that determines the buy or sell price for a stock and a bid-ask bounce, ... Read Answer >>
  4. What do the bid and ask prices represent on a stock quote?

    Learn what the bid and ask prices mean in a stock quote. Find out what represents supply and demand in the stock market and ... Read Answer >>
  5. How do I use a limit order in conjunction with a bid-ask spread?

    Understand the concept of the bid-ask spread as it applies to trading and how it impacts the pricing of limit orders used ... Read Answer >>
Trading Center