What is a likely consequence of having many buyers and sellers in a market?

Having many buyers and sellers in a market is likely to improve market integrity. A high number of participants typically leads to better competition, which enhances price discovery. When various buyers and sellers interact, they contribute diverse information and perspectives, facilitating more accurate pricing of assets. This transparency ensures that prices reflect available information and reduces the likelihood of manipulation, thus promoting integrity in the market.

In contrast, increased volatility arises from less liquid markets where fewer buyers and sellers may lead to larger price swings. The presence of many participants helps to absorb shocks, stabilizing prices. Additionally, with a crowded marketplace, the chances of mispricing generally decrease as various viewpoints and information are incorporated into asset valuations. Restricted access to market information is also less likely in a market with many participants, as the widespread involvement tends to ensure information is disseminated more broadly.