What are Market Participants?

Market participants are those buyers and sellers transacting business in the principal market for an asset or liability. The concept is used in relation to the development of fair market values for assets and liabilities. The quality of fair market value information is considered to be higher when there are many market participants. The ideal market participants have the following characteristics:

Not related parties. If the participants were related parties, they might collude to lower prices.
Adequate knowledge. The participants should have a reasonable understanding of the asset or liability.
Buy/sell capability. The participants are capable of entering into a transaction to buy or sell the item.
Motivation. The participants are motivated to buy or sell in the market.