In finance

Finance

"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...

, market depth is the size of an order needed to move the market a given amount. If the market is deep, a large order is needed to change the price. Market depth closely relates to the notion of liquidity, the ease to find a trading partner for a given order: a deep market is also a liquid market.

Factors influencing market depth include:

• Tick
  Commodity tick
  Futures exchanges establish a minimum amount that the price of a commodity can fluctuate upward or downward. This minimum fluctuation is known as a tick or commodity tick...
  
   size
  Tick size
  In financial markets, a tick size is the smallest increment by which the price of stocks, futures contracts or other exchange-traded instrument can move....
  
  . This refers to the minimum price increment at which trades may be made on the market. The major stock market
  Stock market
  A stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.The size of the world stock market was estimated at about $36.6 trillion...
  
  s in the United States
  United States
  The United States of America is a federal constitutional republic comprising fifty states and a federal district...
  
   went through a process of decimalisation
  Decimalisation
  Decimal currency is the term used to describe any currency that is based on one basic unit of currency and a sub-unit which is a power of 10, most commonly 100....
  
   in April 2001. This switched the minimum increment from a sixteenth to a one hundredth of a dollar. This decision improved market depth.
• Price movement restrictions. Most major financial markets do not allow completely free exchange of the products they trade, but instead restrict price movement in well-intentioned ways. These include session price change limits on major commodity
  Commodity
  In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services....
  
   markets and program trading
  Program trading
  Program trading is a generic term used to describe a type of trading in securities, usually consisting of baskets of fifteen stocks or more that are executed by a computer program simultaneously based on predetermined conditions...
  
   curbs on the NYSE, which disallow certain large basket trades after the Dow Jones Industrial Average
  Dow Jones Industrial Average
  The Dow Jones Industrial Average , also called the Industrial Average, the Dow Jones, the Dow 30, or simply the Dow, is a stock market index, and one of several indices created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow...
  
   has moved up or down 200 points in a session.
• Trading restrictions. These include futures contract
  Futures contract
  In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...
  
   and options
  Option (finance)
  In finance, an option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the...
  
   position limits as well as the widely used uptick rule
  Uptick rule
  The uptick rule refers to a trading restriction that disallowed short selling of securities except on an uptick. For the rule to be satisfied, the short must be either at a price above the last traded price of the security, or at the last traded price if that price was higher than the price in the...
  
   for US stocks. These prevent market participants from adding to depth when they might otherwise choose to do so.
• Allowable leverage. Major markets and governing bodies typically set minimum margin requirements for trading various products. While this may act to stabilize the marketplace, it decreases the market depth simply because participants otherwise willing to take on very high leverage
  Leverage (finance)
  In finance, leverage is a general term for any technique to multiply gains and losses. Common ways to attain leverage are borrowing money, buying fixed assets and using derivatives. Important examples are:* A public corporation may leverage its equity by borrowing money...
  
   cannot do so without providing more capital.
• Market transparency. While the latest bid or ask price is usually available for most participants, additional information about the size of these offers and pending bids or offers that are not the best are sometimes hidden for reasons of technical complexity or simplicity. This decrease in available information can affect the willingness of participants to add to market depth.

In some cases, the term refers to financial data feeds available from exchanges or brokers

Stock broker

A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...

. An example would be NASDAQ Level II quote data.