Home Markets Bank of England policymaker questions market maker get-out clauses

Bank of England policymaker questions market maker get-out clauses

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A general view shows The Bank of England in the City of London financial district in London, Britain, November 5, 2020. REUTERS/John Sibley

Scrapping get-out clauses for market makers when trading turns rocky could avoid a repeat of the volatile ‘dash-for-cash’ seen at the start of pandemic lockdowns last year, a Bank of England policymaker said on Wednesday.

The BoE and other central banks had to inject liquidity into markets to avoid a freeze as shuttering economies last March to fight COVID-19 triggered extreme bouts of trading volatility.

Regulators across the world are now studying potential reforms to investment funds and how derivatives and other markets work to bolster market resilience and avoid a ‘dash-for-cash’ from happening again.

Jonathan Hall, a member of the BoE’s Financial Policy Committee, said action to avoid another “jump-to-illiquidity” could include forcing market makers to make available buy and sell prices at all times, as the UK…

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