US counsel vexed by regulatory impact on bond liquidity

Author: Edward Price | Published: 7 Dec 2015

US counsel are increasingly focusing on the impact of regulations on lower levels of liquidity in US bond markets.  

The impact of regulation on bond market liquidity is a good case study. Suspects include the Volcker Rule, liquidity rules and capital requirements, including total loss absorbing capacity (TLAC). Yet whatever the contribution of individual rules and regulations, one simple fact is apparent. “As we stand today, there is less capital allocated to make markets in bonds,” said Richard Farley, partner at Paul Hastings.

Unknown impacts

Counsel in the US are spending increasing time considering the influence, intended or otherwise, of rules on markets.

Richard Farley
Paul Hastings

“It does seem clear that some combination of the regulatory changes is affecting market liquidity,” said Oliver Ireland, partner at Morrison Foerster.   

The industry is also concerned. In September, the Securities Industry and Financial Markets Association (Sifma) dedicated an...