Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price. (from investopedia)
Suppose I am making markets in SPY. I need to know where everything else is trading so that I can price it. If my prices are stale by a millisecond then I get filled on my SPY market making orders, but can't get my hedge in the other products because the market has moved against me.
