Markets stocks volatility

As Manic Market Moves Metastasize, Mind The Liquidity Drought

A recipe for "fun". 

A recipe for "fun". 
This content has been archived. Log in or Subscribe for full access to thousands of archived articles.

2 comments on “As Manic Market Moves Metastasize, Mind The Liquidity Drought

  1. Harvey Cotton

    Admittedly an amateur question, so please do not bash my head in for being stupid, but isn’t participation for Emini S&P 500 futures a pretty narrow measure for the liquidity of the market? Wouldn’t the volume of trades during the day, or cash and cash equivalents held by institutional investors be other measures?

    I get that some liquidity is provided by margin debt, and I get that a lot of money is tied up in bonds or illiquid ETFs and other instruments, but if the market is fundamentally illiquid, where is the demand coming from to keep pushing equity prices higher when they are already dear and interest rates are so low? The S&P is a global investment vehicle, and T.I.N.A. right? And the B.T.F.D. crowd never disappoint, and every time there is a hint of the promise of good news the market surges. So if demand seems to be there, and cash seems to be there, I don’t get the disconnect.

    • Anonymous

      Well imho, liquidity doesn’t have to do with market direction. You can have five people trading it and the results will be similar to what we are accustomed seeing in the market, except for spreads which will be wider of course and volatility which will be much higher, price direction is not effected, even if liquidity is small. Your second point on eminis being measure of liquidity and not trade volume, as far as i understand it is a better measure because volumes are polluted by HFTs, on any given day something like 60% are HFTs.

Speak On It

Skip to toolbar