- high - frequency - trading / review - of - high - frequency - trading - and - dark - liquidity - 2015 / >. bis central bankers ’ speeches high - frequency trading does not have a presence in the physical bond market while it has a modest presence in the bond futures market, growing to around 15 per cent over the past few years. that said, high - frequency trading activity in the domestic market is often concentrated around particular events, most notably the bond futures rolls. the share of high - frequency trading around the futures roll can be considerably higher. the presence of high - frequency traders can reduce the costs, in terms of spread, of transacting small parcel sizes. there is evidence of that occurring in the domestic market. but, high - frequency trading firms do not hold trading positions for a long period of time. during periods when market prices are adjusting, the presence of market participants that have longer holding periods can be beneficial because these participants absorb some of the order imbalance. one possible concern for the future evolution of the bond market is that high - frequency firms reduce the return to market - making activities in normal ( benign ) times causing market makers to exit as such activity becomes uneconomic. this reduction in market - making then becomes problematic in more turbulent times exacerbating market disruption. this is a potential development we will be monitoring, although there is no evidence that this has been an issue to date in the local market. conclusion in conclusion, australian fixed income markets have continued to function satisfactorily, even while in some overseas markets there has been increased concern about the capacity of such markets to function effectively. as i ’ ve noted, part of the explanation for the difference is that the withdrawal of dealers from the bond market in australia has not been as sizeable as it has been elsewhere. regulatory change has contributed to the reduced capacity in the domestic market, but not to the detriment of market functioning. indeed, the fact that the price of liquidity now more accurately reflects the cost of providing liquidity is a positive outcome. another development that has contributed to the satisfactory outcomes in the domestic market is that a large share of market activity is undertaken in derivative markets that don ’ t rely as much on market - making capacity and are relatively low cost and efficient. it is likely that fixed income markets in australia will continue to evolve in coming years, which will require market participants to keep adapting. on our side, we will continue to monitor this evolution

joined the rate cutting process. moderate global growth and inflation outlook suggest that central banks may continue to ease monetary tightness in the upcoming period. meanwhile, inflationary inertia persists, yet it has weakened. therefore, central banks continue to communicate that they will maintain necessary monetary tightness and adopt a cautious approach in rate cuts. moreover, central banks of some countries such as brazil and russia have increased policy rates in response to their country - specific inflation outlook. macroeconomic outlook esteemed guests, now i would like to share with you our observations on domestic macroeconomic developments. in the second quarter of the year, the contribution of domestic demand to annual growth decreased significantly, while net exports continued to make a positive contribution to growth. in this period, domestic demand contributed 1. 2 points to growth, while net exports'contribution was 1. 3 points. thus, demand composition in growth displayed a more balanced outlook. current data for the third quarter reveal that the mild course of domestic demand continues. in this period, retail sales and trade sales volume indices increased slightly compared to the previous quarter. 2 / 10 bis - central bankers'speeches however, looking at the retail sales volume index in more detail, the increase is milder when gold is excluded. in addition to these indicators, field observations from interviews with firms also confirm the slowdown in domestic demand. current supply indicators for the third quarter were consistent with the slowdown in domestic demand. although industrial production decreased in this period, the fall in production was more limited when highly volatile sectors are excluded. the services production index displayed a stronger outlook than industrial production, yet posted a limited quarterly decline according to july - august data. in the third quarter, the moderate loss of momentum in production indicators is in general consistent with the demand developments i have summarized. against this background, domestic demand conditions have approached levels that support the decline in inflation. indicators constructed with alternative methods reveal that the output gap declined in the third quarter. we assess that this decline continues in the last quarter of the year as well. at this point, i would like to emphasize that the rebalancing in domestic demand will continue as a result of our tight monetary policy. the output gap, which will fall to negative levels in the upcoming period, will be an important component of the disinflation process. we see that the improvement in the foreign trade balance continues in line with the rebalancing in domestic demand. accordingly, the ratio of the current account deficit to