But there are question marks around their resilience in times of market stress. The key structural change is the shift in market share from those who provide immediate and continuous liquidity and have the ability to warehouse risk to those who do the same but don’t have the capacity to warehouse risk.
In this regard, the bond market has followed the well-trodden path of the equity market and later the foreign exchange market of increased electronic trading and increased participation by high-frequency traders (HFT). Not all would regard the “equitisation” of the bond market (or foreign exchange market for that matter) as a good thing.