KAPASI Over the last couple of years, ICMA has undertaken significant research and advocacy into improving liquidity in European and cross-border debt markets, as well as ensuring liquidity can be maintained in times of stress and increased regulation. I would like to share some of our conclusions.

Secondary-market liquidity is clearly becoming more challenged. Larger trades are more difficult to execute, and liquidity conditions vary across markets, jurisdictions and credit ratings. Liquidity is better for some buy-side counterparties than others and anecdotal evidence suggests some preferential treatment from the sell side.

Electronic platforms and protocols are providing some incremental improvements although they are not a panacea. In other words, they may be helping at the margin but are not solving the fundamental problem.

Liquidity is dynamic and has a tendency to be fleeting, for example immediately after primary issuance or credit events. Liquidity can increase or decrease for a particular piece of paper depending on timing and specific corporate events.

Meanwhile, macroeconomic policy can have an influence on specific pockets of liquidity.

KAPASI One very general effect would be an increase in liquidity and market-making and proprietary-trading activity by banks as a result of the roll back in Dodd-Frank regulations.

As a credit-derivatives structurer in a prior role, I would add that liquidity was very robust in fixed income in the period just before the 2007 financial crisis. My takeout from this is that increased liquidity is good to a point and, while increases in liquidity for the sake of prop or derivatives trading can be healthy, after a certain point they can be indicative of risks for the economy.