Citation

Discussion Paper Details

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Title: Market Liquidity after the Financial Crisis

Author(s): Tobias Adrian, Michael J Fleming, Or Shachar and Erik Vogt

Publication Date: August 2017

Keyword(s): corporate bonds, liquidity, market making, regulation and Treasury securities

Programme Area(s): Financial Economics

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. Treasuries and corporate bonds, we find only limited evidence of a deterioration in market liquidity.

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Bibliographic Reference

Adrian, T, Fleming, M, Shachar, O and Vogt, E. 2017. 'Market Liquidity after the Financial Crisis'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12248