Fragilities in the U.S. Treasury Market: Lessons from the “Flash Rally” of October 15, 2014
IMF Working Papers, October 13, 2015
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- Fragilities in the U.S. Treasury Market: Lessons from the “Flash Rally” of October 15, 2014
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Bibliographic details
- Authors: Antoine Bouveret, Peter Breuer, Yingyuan Chen, David Jones, Tsuyoshi Sasaki
- Published: October 13, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513576220.001
Overview
- Authors: Antoine Bouveret, Peter Breuer, Yingyuan Chen, David Jones, Tsuyoshi Sasaki
- Date: October 13, 2015
- Series: Working Paper No. 2015/222
- Pages: 44
- DOI: https://doi.org/10.5089/9781513576220.001
- Stock No: WPIEA2015222
- ISBN: 9781513576220
- ISSN: 1018-5941
- Core summary: Changes in the structure of the U.S. Treasury market over recent years may have increased risks to financial stability. Traditional market makers have shifted from risk warehousing to risk distribution, and electronic trading has given rise to a new breed of market maker. The “flash rally” of October 15, 2014 provides a clear example of how those risks can materialize.
Key findings and analysis
- Structural changes in market making:
- Traditional market makers increasingly switched from risk warehousing to risk distribution.
- A new breed of market maker emerged with the rise of electronic trading.
- Event focus:
- The “flash rally” of October 15, 2014 is analyzed in depth as a clear example of the materialization of market-structure risks.
- Complement to authorities’ work:
- The paper presents an in-depth analysis that complements work undertaken by authorities.
Policy recommendations
- Principal recommendations presented in the paper:
- Provide incentives for liquidity provision.
- Improve market safeguards.
- Enhance the regulation of the Treasury market.
Subject areas and keywords
- Subject: Asset and liability management, Financial institutions, Financial markets, Futures, Futures markets, High frequency trading, Liquidity, Treasury bills and bonds
- Keywords: Financial Stability, Futures, Futures markets, Global, High frequency trading, High-Frequency Trading, Liquidity, liquidity provision, market, market depth, market liquidity, market participant, market safeguard, trading, Treasury bills and bonds, Treasury market, WP
Fragilities in the U.S. Treasury Market: Lessons from the “Flash Rally” of October 15, 2014, IMF Working Paper No. 2015/222