Assets that tend to be traded primarily by “buy-and-hold” investors may require greater warehousing of risk to facilitate the matching of trades at or close to prevailing market prices. By way of illustration, there is a sharp contrast between the frequency of trading in equities and corporate bonds. For example, McKinsey estimates that NYSE and NASDAQ-listed equities trade around 3800 times per day, compared to around 85 times per day and 65 times per day for the most liquid US investment-grade and high-yield corporate bonds respectively. Assets exposed to tail risks tend to exhibit larger price falls and become less liquid in times of stress. Examples of such assets include high yield/EME bonds, financial debt and OTC derivatives. Complex and/or opaque assets are less well understood and the risks can be more difficult to manage, so reducing the pool of potential buyers. Finally, assets with relatively news-insensitive cash flows like investment-grade corporate bonds may be less attractive to more active investors seeking to profit from information, but more attractive to buy-and-hold investors seeking predictable long-dated cash flows. And the related issue of how assets are traded matters. The costs of liquidity on order driven electronic platforms is much lower than in markets that depend on voice quotes from market makers. Against that backdrop, I’d like to make two observations. First, funding and monetary liquidity can exacerbate the illusion of market liquidity.
But I hope that increasingly there will be other things as well as regulation to talk about. BIS central bankers’ speeches  7