Volatile And New Liquidity Environment: How Did Markets Cope With It?

Despite current and future financial market uncertainty, the participant has proved resourceful and proactive. They are sometimes preventive in helping their organisations through the volatile, enabling them to prepare for a new liquidity environment. 

As they are significantly affected by the global crisis that continues to evolve and grow, precautionary actions need to be taken immediately.  

For example, the Covid-19 outbreak in late February of last year had an immediate effect on the financial market. As a result, liquidity began to increase noticeably. 

Although the liquidity may have worked during the Covid-19 crisis, there is much debate about how the market was affected by the availability of underlying liquidity. 

Nevertheless, brokerage, fund managers, or traders should be proactive in monitoring and planning for liquidity impacts.  

In this article, let us explores the evolving market liquidity environment, driven by volatility.  

The current liquidity environment  

The industry is constantly grappling with the problems that have arisen as a result of market structural change. 

From market liquidity to fund liquidity, financial market participants continue to refine how they measure, model and report different types of liquidity. They’re also trying to change their investment strategies and diversify their portfolios. 

In recent years, financial technology companies and non-bank liquidity providers have innovated greatly, allowing for a range of aggregation and price discovery opportunities. 

While it must be said that some tier one bank liquidity providers have responded positively to this, it appears to have helped sustain stability in the wider market.  

Disruptors’ developments in recent years have all contributed to the market’s ability to survive the storm. 

Risk management should be more proactive than ever in this situation. Previous assumptions and limits should have been revisited to reflect current market realities, and first and second lines of protection should have adapted to new market conditions. 

As a result, businesses must assess their liquidity exposure and compare it to their counterbalancing capability. 

They must focus on their liquidity exposure and counterbalancing capacity to determine the circumstances that could cause failure due to illiquidity. 

Liquidity is an important part of the growth of financial markets. As liquidity helps to deepen and improve financial markets, measures aimed at fostering liquidity would have a positive effect on overall financial market growth. 

Taking action 

Moving into 2021, to provide continuous access and resilient liquidity, institutional or retail investors may ensure the best mix of connectivity to liquidity venues and relationships with counterparties.   

As a reputed and trusted liquidity provider, Doo Clearing continues to expand its liquidity offerings and update its infrastructure, firmly establishing itself as a competitive liquidity provider.  

Doo Clearing remains committed to providing reliable, advanced, and secure systems to its diverse and ever-growing community of primary and regional dealers, professional trading groups, and other institutional traders around the world.  

About Doo Clearing  

Doo Clearing is part of The Doo Group, aiming to offer an institutional and bespoke level of liquidity access and clearing services for Forex and CFDs in equities, future and commodities, and other financial products.  

With the robust clearing system powered by Doo Tech, Doo Clearing is now serving brokers, broker-dealers, hedge funds, family offices, fund managers, and professional traders globally.  

Currently, Doo Clearing provides liquidity access and clearing services via our regulated entity in the United Kingdom. The Doo Group has other regulated entities in the United States, Mauritius, and Vanuatu, with operating centres in Hong Kong, Dallas, Singapore, Kuala Lumpur, and among others.  

To get started, contact Doo Clearing’s Specialist team today for an insightful preview of how we can bring your brokerage to the next level.  

London Office  

Email: [email protected]  

Website: www.dooclearing.co.uk 

Hong Kong Office  

Email: [email protected]  

Website: www.dooclearing.com