Answer: liquid markets with low commissions and order price impacts.

## Explanation Operational efficiency in financial systems refers to how well the system facilitates transactions with minimal costs and friction. The key characteristics of operationally efficient markets include: 1. **Low transaction costs** - This includes low commissions, fees, and bid-ask spreads 2. **Minimal price impact** - Large orders can be executed without significantly moving the market price 3. **High liquidity** - Assets can be bought and sold quickly without substantial price concessions 4. **Fast execution** - Orders are processed quickly and efficiently Let's analyze each option: **Option A**: "security prices that reflect fundamental values" - This describes **informational efficiency** (efficient markets hypothesis), not operational efficiency. Informational efficiency means prices incorporate all available information. **Option B**: "the use of resources where they are most valuable" - This describes **allocational efficiency**, where capital flows to its most productive uses. This is a broader economic concept. **Option C**: "liquid markets with low commissions and order price impacts" - This directly describes operational efficiency. Liquid markets allow for quick execution, low commissions reduce transaction costs, and minimal price impact means trades don't significantly move prices. Therefore, operational efficiency is specifically about the cost and ease of executing transactions, making Option C the correct answer.

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