The market centered liquidity metrics always deliver the important developments and indications that have been occurred in the past or present days. The information related to the present and future of markets capacity and the dealers’ agreement to take up new task has always decreased. Hence, this post helps us to measure the upcoming trends associated with dealer inventories and also their risk-addressing behavior which was evaluated in terms of a recently held survey and other connected interviews.
- The dealers’ inventories
On the present-day perspective, the gross aggregate of whole data stacked with all major banks’ and the net trading security treasures shows a steep decrease in the account of inventories during the period of the world financial crisis. From the point of such an economic crunch, all the positions held by most of the big banks were broadly stabilized to maintain the robustness during any such inappropriate period.
This advancement made them continue contributing to the inventory of emerging market banks from the basic stages in both absolute and relative terms similar to the share measured for trading securities in total earning assets.
- The much preferred and differentiated adjustment
On account of inventory information, there exist broad classifications across jurisdictions like the asset class. Recently, an interesting pattern of position changes was noticed where the dealers’ net position in corporate asset-backed debt securities has inclined after a steep fall.
Similar trends also occur among the ones which are less subject to the global economic crisis and have consistently increased the size of their domestic government bond keeping along with decreasing the corporate bond inventories.
- The variations made in different business models
While the inventory scheme shows off only a rough approximation of dealers’ capability of building up large trading sectors or market making positions, they actually measure the criteria rather than potential holdings. Thus, the trending inventory appears to tally with the feedback collected from the market participants.
In many capital nations, the shareholders gave their view that most of the market makers really wish to take up and hold different inventory positions and also related instruments. As always, these market participants continue to keep on searching for activities that require only a less capital investment and balance sheet capacity. The main idea behind this is decreasing the share of inventory revenue toward their profit and loss account and gradually shifting toward more order-steered and brokerage models. This further results in the execution of large trades that need more time to execute in less liquid markets.