Market liquidity after the financial crisis

Tobias Adrian, Michael Fleming, Or Shachar and Erik Vogt

No 796, Staff Reports from Federal Reserve Bank of New York

Abstract: This paper examines market liquidity in the post-crisis era in light of concerns that regulatory changes might have reduced dealers? ability and willingness to make markets. We begin with a discussion of the broader trading environment, including an overview of regulations and their potential effects on dealer balance sheets and market making, but also considering additional drivers of market liquidity. We document a stagnation of dealer balance sheets after the financial crisis of 2007-09, which occurred concurrently with dealer balance sheet deleveraging. However, using high-frequency trade and quote data for U.S. Treasury securities and corporate bonds, we find only limited evidence of a deterioration in market liquidity.

Keywords: liquidity; Treasury market; regulation; corporate bonds; market making (search for similar items in EconPapers)
JEL-codes: G12 G21 G28 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2016-10-19
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-fmk and nep-mst
Note: An earlier version of this paper circulated in May 2015 under the title “Vol-of-Vol and Market Making.”
References: View complete reference list from CitEc
Citations: View citations in EconPapers (40)

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Related works:
Journal Article: Market Liquidity After the Financial Crisis (2017)
Working Paper: Market Liquidity after the Financial Crisis (2017)
Working Paper: Market Liquidity after the Financial Crisis (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fednsr:796

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