Current liquidity

[smetas]

Hi there. I'm looking for some advice on a question that I need to do a presentation on at work.
I need to talk about "the current liquidity crisis and the effect on equity electronic trading markets".

Anyone out there offer any good thoughts ?

 

[bbmac]

As a general and obvious point: Falling levels of liquidity can be beacause of falling levels of risk apetite in the particulr asset class/generally and/or falling levels of participants getting involved in that asset class for this or other reasons. The international money markets are composed of various participants acting on their own analysis and this results in flows in and out of the disperate asset classes and instruments at different times for these reasons. The lack of liquidity can result in thin markets that can be more easily manipulated and can typically manifest itself as ranging/directionless markets.

G/L with your paper.

 

[Hakuna Matata]

what industry are you involved in? what does your company do?

really need more information before you get any reasonable guidance

 

[NVP]

type it into google .....works for me everytime i need to do a presentaion at work

N

 

[smetas]

Thanks for your reply bbmac and others. I realise it is quite a straightforward question and that the lack of liquidity will result in thin markets and wider spreads. As you say ranging/directionless mrkets will result. Problem is I need to talk for 20 mins on the subject. The question relates to equity electronic markets specifically.

 

[Hakuna Matata]

Thanks for your reply bbmac and others. I realise it is quite a straightforward question and that the lack of liquidity will result in thin markets and wider spreads. As you say ranging/directionless mrkets will result. Problem is I need to talk for 20 mins on the subject. The question relates to equity electronic markets specifically.

So it's the liquidity of a particular instrument that you're meant to discuss Because the current "liquidity crises", in my mind, refers quite obviously to the availability of funding to businesses - not, say, that apple stock is 4c wide and only 200 up either side.

And another thing - to infer that a ranging/directionless market will result from lack of liquidity is not right. Think about the sub-prime crises, for example - illiquid assets, values falling out of the sky.

 

[smetas]

Hi Hakuna Matata - the title of the debate it "the current liquidity crisis and how it affect equity electronic markets". So how is the lack of volume affecting electronic trading.........

 

[Shakone]

Well first you need to discuss evidence that there is a liquidity crisis in the first place. Is there? In which markets? How do you know? Volume traded is not liquidity, it's actually tricky to tell how much liquidity (or potential liquidity) there really is at any given time, and at various levels of price.

That should cover the first 5 mins of the talk at least

 

[wallstreetwarrior87]

Hi Hakuna Matata - the title of the debate it "the current liquidity crisis and how it affect equity electronic markets". So how is the lack of volume affecting electronic trading.........

Would the best starting point for your paper be to define what liquidity actually is? This will be your foundation moving forward. If not, you and others who are involved with this topic maybe all approaching this from different angle, leading to confusion.

For example who is affected by this "crisis"? As not everyone will be affected in the same way, indeed some will not really be affected at all.

It really is a very general title in which you could go down many avenues.

Good luck with it!

 

[smetas]

The topic refers to the equities market.. Obviously there is a lack of volume currently being traded in the US and European markets but that doesn't mean there is a lack of liquidity. You're quite right. You have got me thinking now..

 

[Hakuna Matata]

Hi Hakuna Matata - the title of the debate it "the current liquidity crisis and how it affect equity electronic markets". So how is the lack of volume affecting electronic trading.........

Don't mean to be rude, but is English your first language? Because that "title" is pretty poorly phrased...

 

[smetas]

"the current liquidity crisis and the effect on equity electronic trading markets".

Yes, English is my first language.... word for word from my employer...

 

[Hakuna Matata]

"the current liquidity crisis and the effect on equity electronic trading markets".

Yes, English is my first language.... word for word from my employer...

oh, jeez... well, a brain dump - in no particular order:

* agree with wsw about a primer on what exactly "liquidity" is
* How do you measure liquidity?
* TCA? (see here, implicit costs for a primer
* "Fake Liquidity", as in RSJ/Algo quote machines
* migration of volumes from exchange -> dark pools
* HFT
* When liquidity goes wrong - recent examples like Knight Capital and BATS, flash crash even.
* possible political pressures on liquidity - effect of a ban on short sales on liquidity, or political pressures for a tobin-tax (use sweden as an example)

g/l

 

[smetas]

Thanks Hakuna Matata - good ideas there.

 

[Nicolas01]

I think you will gain time by developing each steps of the questions given by Shakone.I think these are great points you should add into your presentation.
Good luck.

 

[rsh01]

are there any market participants (eg front office staff - say at your company? clients?) you know of you can call up to get their viewpoint on the liquidity crisis? this may help determine what shakone suggested: is there a current liquidity crisis? how has it impacted them in the market?

a few quotes/comments here & there from people itk wld fill it out a bit, and show some initiative if you have had to go externally to get. though loadsa articles on it which will of course be easier to reference.