4  BIS central bankers’ speeches  Moreover, much of this so-called liquidity, especially in opaque over-the-counter markets, is potentially illusory and destabilizing, especially during adverse market conditions, which does not benefit the public. Indeed, proprietary trading involves buying and selling purely for speculative purposes that have little to do with a true assessment of a financial position’s underlying value.
Price discovery actually is impeded by this hyper-liquidity that is introduced by such speculation. This hyper-liquidity, motivated by nothing more than expectations of short-term price movements, creates inefficient subsidies to buyers and sellers with no compelling public benefit. I think that certain markets should feature large credit spreads because they involve truly risky products.