Trying to borrow liquidity from different markets presents even greater challenges. In looking at the traditional futures exchanges, for example, there is a na ve view that existing pools of liquidity can be redirected toward new markets, as if willing traders and capital were waiting in a bullpen, ready to be dispatched to any new market the exchange sponsored. The simultaneous decline in some traditional financial markets and the growth of new markets has also resulted in existing market makers offering their services to new marketplaces. Speculators Create Liquidity. It is common wisdom that successful markets require speculators.
Speculators require the ability to move in to and out of a market quickly and at low cost.
In that sense, they are more liquidity parasites than liquidity creators, though they may play a role in adding liquidity to an already successful market. In contrast, if there are good arbitrage opportunities, arbitrageurs are willing to join in even during the startup phase of a market. That Only Build Liquidity in Financial Markets. These future commitments to buy or sell also have the advantage that they are tradable, which allows companies to dynamically reconfigure their risk management strategy easily and continually. Further, derivatives are necessary if a market is ever to reach its full liquidity potential.