High-Frequency Trading Causes More Liquidity Shortages, BIS Says
- Stocks, bonds see illiquidity episodes increase in frequency
- Researchers point to factors including algos and fragmentation
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Financial markets have become more susceptible to liquidity shortages with the rise of algorithmic trading and increased market fragmentation, according to the Bank for International Settlements.
The institution analyzed 25 years worth of high-frequency trading data across asset classes in the US, Europe and Japan and concluded that markets have become more fragile even as liquidity on average improved.