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Market Liquidity after the Financial Crisis

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Listed:
  • Adrian, Tobias
  • Fleming, Michael J.
  • Shachar, Or
  • Vogt, Erik

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.

Suggested Citation

  • Adrian, Tobias & Fleming, Michael J. & Shachar, Or & Vogt, Erik, 2017. "Market Liquidity after the Financial Crisis," CEPR Discussion Papers 12248, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12248
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    References listed on IDEAS

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    More about this item

    Keywords

    Liquidity; Market making; Treasury securities; Corporate bonds; Regulation;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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