How can we protect and strengthen the structure of these markets? In tomorrow’s session, several panels will discuss market structure, including potential risks to clearing and settlement infrastructure, and ask how current structures might be adapted to provide greater liquidity and better guard against liquidity risk.
I would point to four important trends that have been driving the changing structure of these markets: first, advances in computerized trading and high-speed communications and the entry of new players using these technologies; second, the intensified prudential regulation and supervision of the systemically important banks that are the largest dealers; third, the banks’ own re-evaluation of risk in the wake of the financial crisis; and fourth, the increasing importance of mutual funds and other asset managers.