How would you define a "liquidity issue"? I would define it as "current liabilit...

ncallaway · on Jan 31, 2021

> I would define it as "current liabilities in excess of current assets"

I don't think this is a good definition.

If I have a $150 electric bill due immediately, no cash, and $200,000 of real estate I have a liquidity issue.

This despite the fact that my current assets far exceed my current liabilities.

skybrian · on Jan 31, 2021

If someone tells you to buy the Empire State Building and you refuse, do you have a liquidity issue?

They are refusing to do things to prevent liquidity issues. Their customers can send requests that cause them to temporarily take on more debt. There are particular orders that need a lot of money to execute. Block those orders and they don't need to borrow the money.

cm2187 · on Jan 31, 2021

> I would define it as "current liabilities in excess of current assets"

That's solvency, not liquidity. If your liabilities exceed your assets you have gone bust.

Liquidity is having the cash to cover your outflows. You may have enough assets but if these assets aren't liquid, you have a liquidity issue.

mdoms · on Jan 31, 2021

They literally did not have enough money in the bank to continue business as usual. If that's not a liquidity issue I don't know what is.

skybrian · on Jan 31, 2021

It wasn't "business as usual," though. It was a huge spike in orders that became very expensive to execute.

You could say they didn't provision enough resources to handle extreme load.

xiphias2 · on Jan 31, 2021

They were in it, as they wouldn't have been able to deliver the value of the options at that point (that's why they needed the cash injection).

The whole stock market industry is based on fractional reserves.

paulgb · on Jan 31, 2021

What do you mean by

> deliver the value of the options

Do you mean they wouldn't be able to give people cash if they sold their options?