over - interpreting a few isolated case studies, where excessive market conviction – that the next move in us rates would bis central bankers ’ speeches definitely be up ; and the swiss peg was immutable – led to highly crowded trades accentuating the price moves and the impact on volatility. but this is not the interpretation i lean towards. not least because we hear from market participants that, far from biting in extreme circumstances, these are issues that ficc businesses are grappling with on a daily basis. an eight standard deviation move in us treasuries, on weaker - than expected us retail data, lies outside the bounds of what could be considered a transient trend. consolidation and electronification have plausibly combined to accentuate the sharp moves seen last autumn and this january. the apparent increase in the incidence of such spikes in recent months may be because the “ comforting cloak ” of “ low - for - long ” has been less of a factor in suppressing volatility in preceding months. turning to the “ so what? ”, it is definitely not that the rise in volatility that is a concern per se : if anything, policymakers have long been concerned about the potential financial stability risks associated with a long period of low volatility. even with the recent rises, volatility in most asset classes is only close to the average level of the pre - crisis period ; a period which after the fact proved to have been associated with the under - pricing of risk and suppressed market volatility. nor is it that necessarily the case that some decline in the liquidity of financial markets would be a concern : the correct answer is not always maximal liquidity as i noted earlier. we are unlikely to return to this pre - crisis world and should not see it as an aspiration. but, if we accept the hypothesis that the market ’ s ability to digest significant news has changed such that sudden increases in volatility and loss of liquidity are more likely, then the concern is that the stabilising factors which dampened the impact of such events in recent months may not always kick - in. in those circumstances the period of market dislocation could become more persistent, increasing the scope of spillovers across financial markets, with potentially more significant impacts for financial stability. put another way, recent months have shown the potential for short, sharp shocks. but financial markets may not have been truly tested for the ability to absorb price moves or flows that persist for a

making capacity has been associated with increased concentration in many ficc markets, as firms have been more discriminating about the markets which they make, or the clients they serve. and this trend has gone hand - in - hand with a growth in assets under management by the buy - side community. the combination has served to amplify the implications of reduced risk warehousing capacity of the intermediary sector relative to the provision of liquidity from market makers during times of market stress relative to the past. that said, i would hesitate in drawing too much of a comparison between the market liquidity of today and that of pre - crisis. you don ’ t need a long memory to recall the impact of underpricing liquidity risk on the highly leveraged market makers. returning to such a situation would be a misplaced aspiration. the second theme i want to draw out is the evolution of market micro - structure. electronic platforms are now increasingly used across the various ficc markets. in some cases regulation has been the cause but in others, such as foreign exchange markets, firms have over a number of years increasingly embraced electronic forms of trading. this includes using “ request - for - quote ” platforms to automate processes previously carried out by phone. electronic platforms are effective in pooling liquidity in “ normal ” times but may have the potential, at least as currently calibrated and given today ’ s level of competition, to contribute to discontinuous pricing in periods of stress if circuit - breakers result in platforms shutting down. there has been much commentary about the temporary unavailability of a number of electronic trading platforms in the immediate aftermath of the removal of the swiss franc peg. a contrarian view, which i do not ascribe to, would be that no explanation is required. the argument would be that the apparent change in ability of markets to digest news is a mirage : the statistical analysis would prove to have captured a transient trend, and that intermediaries were never prepared to stand in the way of large market moves, during good times or bad. on this view, the reduction in balance sheet and the move towards electronic structures have been correlated with, but are not a cause of, the events we have seen. and the fact that the spikes in volatility have been visible in equity as well as bond markets, where market structure has not undergone as profound change as ficc markets, would be taken as supporting evidence. this view would caution against