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William Dudley, president of the New York Fed and a front-line
Wall Street supervisor, said one-off "liquidity events" - in
which the trading of Treasury and corporate bonds becomes
significantly more expensive and difficult - may reflect the
complex interactions of high-frequency trading strategies.
Dudley acknowledged that the riskiness of trading in these
markets may have risen. But he largely waved off growing
contentions that regulations meant to safeguard the financial
system after the 2007-2009 crisis are making things worse.
"The evidence to date that liquidity has diminished markedly is,
at best, mixed," he said at a securities industry event.
"Even if one were to interpret the evidence as indicating that
liquidity has been reduced, it is not clear whether regulation
is the primary driver, as other changes have played important
roles as well."
(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)
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