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Thinly Traded Security
(redirected from Thinly Traded Securities)

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Thinly Traded Security
An inactive or infrequently traded bond or stock. Thinly traded securities are usually traded in small batches, approximately five shares at a time. Thinly traded securities are fairly illiquid and may be difficult to sell in a downturn. Their prices are also volatile because a small change in demand can greatly affect the price. Thinly traded securities are sometimes called cabinet securities because they are kept in cabinets on the trading floor until they are needed. See also: Cabinet crowd, Inactive post.

thinly traded security
A security that trades with little volume. Institutional investors usually exclude these securities from their portfolios because of the large price changes that would occur if trades of any significant size took place.


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For thinly traded securities, trading costs are almost invariant with respect to trade size, and spread-related payments account for their largest fraction.
The waves of forced selling then cause panic among investors, leading to the very worst kind of selling, blind liquidation of thinly traded securities into down markets.
Investors also have learned the risk inherent in pricing products off thinly traded securities.
 
 
 
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