that liquidity may be less resilient than it had been previously. but this evidence is not particularly robust, and, given the limitations of the existing data, it is difficult to know the extent to which liquidity resilience may have declined. as we continue to investigate quantitative evidence of the deterioration in the resilience of liquidity in some of the financial markets, we are also trying to tease out the various drivers of liquidity conditions, such as changes in regulation, trading strategies, and market structure. regulatory changes are often cited as a contributing factor. trading financial assets is a balance - sheet - intensive activity, and the dodd - frank act, has created incentives for institutions to carefully assess the risks of such activity through stricter requirements on leverage, liquidity, and proprietary trading, raising the cost of market making and possibly affecting market liquidity. indeed, there is evidence of reductions in broker - dealer bond inventories in recent years. nonetheless, since not all broker - dealer inventories are used for market - making activities, the extent to which lower inventories are affecting liquidity is unclear. moreover, reductions in broker - dealer inventories occurred prior to the passage of the dodd - frank act, suggesting that factors other than regulation may also be contributing. in assessing the role of regulation as a possible contributor to reduced liquidity, it is important to recognize that those regulations were put in place to reduce the concentration of liquidity risk on the balance sheets of the large, highly interconnected institutions that proved to be a major amplifier of financial instability at the height of the crisis. a second possible contributor may be the growing role of electronic execution of trades across equity, treasury, and foreign exchange markets and the associated increasing role of high - frequency trading. competition from high - frequency trading in a particular market may reduce the attractiveness of that market for traditional ( manual ) traders or slower automated traders, leading to a progressive shift in the composition of market participants toward highfrequency traders ( hfts ) over time. this shift could be important to the extent that hfts may have more limited capacity to support liquidity resilience since, on average, hfts appear to trade with smaller inventories and lower capital than traditional traders. although having less inventory and capital reduces the cost of trading, it also means that markets increasingly dominated by hfts may be less able to absorb large shocks. thus, liquidity may be sufficient and relatively cheap on normal trading days

data ] 12. see https : / / www. bundesbank. de / en / statistics / time - series - databases [ https : / / www. bundesbank. de / en / statistics / time - series - databases ] 13. see https : / / www. fsb. org / work - of - the - fsb / market - and - institutional - resilience / post2008 - financial - crisis - reforms / ending - too - big - to - fail [ https : / / www. fsb. org / work - of - the - fsb / market - and - institutional - resilience / post - 2008financial - crisis - reforms / ending - too - big - to - fail ] 14. see fsb ( financial stability board ) ( 2021 ). 15. see https : / / www. core - econ. org / insights / too - big - to - fail / text / 01. html [ https : / / www. core - econ. org / insights / too - big - to - fail / text / 01. html ] 16. see fsb ( financial stability board ) ( 2020 ) and https : / / www. fsb. org / work - of - thefsb / assessing - the - effects - of - reforms [ https : / / www. fsb. org / work - of - the - fsb / assessing - the - effects - of - reforms ] 17. see https : / / www. bis. org / frame [ https : / / www. bis. org / frame ] 18. see deutscher bundestag ( 2020 ) and deutsches aktieninstitut ( 2021 ). 19. see https : / / www. bundesbank. de / en / service / media - library / videos / why - financialstability - isn - t ( tonne ) - boring - 622844 [ https : / / www. bundesbank. de / en / service / media - library / videos / why - financial - stabilityisn - t - boring - 622844 ]