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|Publication type:||Article in scientific journal|
|Type of review:||Peer review (publication)|
|Title:||Central counterparties and liquidity provision in cash markets|
|Published in:||Journal of Risk and Financial Management|
|Publisher / Ed. Institution:||MDPI|
|Subjects:||Basel III; Central counterparty; Liquidity provision; Market making|
|Subject (DDC):||332: Financial economics|
|Abstract:||This paper investigates increased liquidity provision by market makers resulting from their ability to reduce balance sheet encumbrance through the use of central counterparties (CCPs). The introduction of the Basel III leverage rule constitutes a shock to market makers’ balance sheets and thus affects their capacity to intermediate trades. Using trade-by-trade data from sovereign bond markets, we show that liquidity provision by CCP members decreased to a lesser extent following the rule change. We attribute these findings to balance sheet reductions due to the netting enabled by CCPs, thereby highlighting their importance in cash markets.|
|Fulltext version:||Published version|
|License (according to publishing contract):||CC BY 4.0: Attribution 4.0 International|
|Departement:||School of Management and Law|
|Appears in collections:||Publikationen School of Management and Law|
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|2021_Richter_Central-counterparties-liquidity-provisions-cash-markets.pdf||829.03 kB||Adobe PDF|
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Richter, T. (2021). Central counterparties and liquidity provision in cash markets. Journal of Risk and Financial Management, 14(12), 584. https://doi.org/10.3390/jrfm14120584
Richter, T. (2021) ‘Central counterparties and liquidity provision in cash markets’, Journal of Risk and Financial Management, 14(12), p. 584. Available at: https://doi.org/10.3390/jrfm14120584.
T. Richter, “Central counterparties and liquidity provision in cash markets,” Journal of Risk and Financial Management, vol. 14, no. 12, p. 584, 2021, doi: 10.3390/jrfm14120584.
Richter, Thomas. “Central Counterparties and Liquidity Provision in Cash Markets.” Journal of Risk and Financial Management, vol. 14, no. 12, 2021, p. 584, https://doi.org/10.3390/jrfm14120584.
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