Locked Market

We’re all about the strange and unusual. White rainbows? Tell us everything. Dishes made from sea creatures we’ve never heard of? Bring it on. But one unusual thing we’re not so crazy about is a locked market.

A “locked market” happens when a security’s ask price and bid price are exactly the same. It’s called a locked market because, under SEC regulations, no trades of that security can be executed during this time. In other words, it’s locked. Unavailable. Out of reach. In fact, if a security finds itself in a locked market situation, the SEC says its price can’t even be displayed on national exchanges.

So what’s the big deal? Well, when the ask and bid prices are identical, there’s no competition. It’s not really a fair market at that point. Of course, locked markets are historically short-lived; typical market behavior will reassert itself at some point, and we’ll see those bid and ask prices start to move apart. But until they do, we’re going to have to focus our investment attention elsewhere.