What are Market Participants?

Market participants are those buyers and sellers transacting business in the principal market for an asset or liability. These participants are not related parties, have a reasonable understanding of the asset or liability, are capable of entering into a transaction to buy or sell the item, and are motivated to do so. 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.