The Volcker Rule and Corporate Bond Market-Making in Times of Stress

 

 

Speaker: Maureen O'Hara, UTS,Cornell University

 

Abstract: Focusing on downgrades as stress events that drive the selling of corporate bonds, we document that the illiquidity of stressed bonds has increased after the Volcker Rule.  Dealers regulated by the Rule have decreased their market-making activities while non-Volcker-affected dealers have stepped in to provide some additional liquidity.  Furthermore, even Volcker-affected dealers that are not constrained by Basel III and CCAR regulations change their behavior, inconsistent with the effects being driven by these other regulations.  Since Volcker-affected dealers have been the main liquidity providers, the net effect is that bonds are less liquid during times of stress due to the Volcker Rule.

 

Time: 12.00 – 1.00 p.m.

Venue: University of Technology, Sydney

            Building 8
            Dr Chau Chak Wing Building

            14 - 28 Ultimo Road, Ultimo

 

 

Enquiries: Mala Kapahi (Ph: +61 2 9514 7777)