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Liquid Assets


Assets that can be converted easily into cash (or a monetary form) with relatively little loss of, or impact on, value. In the context of exchange trading, broker-dealers have, at all times, at least $1 of liquid assets for each $1 of liabilities (except for subordinated liabilities that from part of the broker-dealer’s own equity) in addition to any minimum requirements under the net capital rule (in case such broker-dealers don not meet the net capital test or voluntarily discontinue operations).

Net capital rule usually aims to ensure that registered broker-dealers maintain at all times sufficient liquid assets to (1) always stand ready to meet their liabilities- i.e., the claims of customers, creditors, and other broker-dealers; and (2) to provide a liquidity cushion (liquid assets in excess of liabilities) to account for potential risks (market risk, credit risk, among others) if liquidation is needed. If so, a broker-dealer’s operations are generally liquidated in an orderly manner within a short period without any resort to a formal bankruptcy proceeding.



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This section covers a wide-ranging array of terms and concepts, among others, in the area of exchanges and financial marekts at large ...
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