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The $5 Trillion Dilemma Facing Banking Regulators  NEW YORK
(Reuters Blogs) -- Last month, I wrote about bond-market
illiquidity -- the problem that its incredibly difficult to buy
and sell bonds in any kind of volume, especially if they're not
Treasuries. That's a big issue but it turns out there's an even
bigger issue hiding in the same vicinity.  The problem is that
there's only a certain amount of liquidity to go around and
under Dodd-Frank rules, a huge proportion of that liquidity has
to be available to exchanges and clearinghouses, the hubs which
sit in the middle of the derivatives market and act as an
insulating buffer, making sure that the failure of one entity
doesn't cascade through the entire system.  Craig Pirrong has a
good overview of what's going on, and I'm glad to say that
Thomson Reuters is leading the charge in terms of reporting
about all this: see, for instance, recent pieces by Karen
Brettell, Christopher Whittall and Hel