of fixed - income securities, which are predominantly used for market making, declined sharply after the lehman brothers failure, from about $ 1. 3 trillion to about $ 800 billion, and have since fallen further to about $ 700 billion. the recent decline might be due in part to regulations, such as the volcker rule and the supplementary leverage ratio, aimed at making the financial system safer and sounder, as well as to changes firms may have made on their own, perhaps in reaction to the experience of the financial crisis. regardless of the causes of the change, market participants have expressed a concern that the decline in inventories reflects in part a reduced willingness or capacity of the primary dealers to make markets - - which may in turn lead to lower liquidity. however, whether markets are in fact less liquid depends on both the degree to which the decrease in primary dealers ’ inventories affects their willingness to provide liquidity and the extent to which nonbank firms such as hedge funds and insurance companies fill any lost marketmaking capacity. 4 2. decline in trade size and turnover market participants also often cite the decline in average trade size and turnover - - the volume of trades relative to the total amount of bonds outstanding - - as bessembinder, jacobsen, maxwell, and venkataraman ( 2016 ) find that bank dealers are less willing to provide liquidity now than in the recent past, while nonbank dealers are more willing. duffie ( 2012 ) argues that the negative effect the volcker rule may have on market liquidity in the short run may disappear in the long run as nonbanks step in to provide liquidity. duffie ( 2012 ) also mentions that the migration of liquidity provision from banks to nonbanks, which are not regulated, may have potentially important adverse consequences for financial stability. - 3evidence of reduced liquidity. figure 2 shows that average trade size in the corporate bond market has indeed declined since 2006 but has been relatively stable in the past four years. nevertheless, this decrease may reflect a number of factors, including changes in technology or the types and preferences of institutions engaged in trades, so it may not indicate a reduction in market liquidity. certainly, the length of this trend, roughly a decade, seems on its face more consistent with a secular trend such as technological change. turnover in the corporate bond market has declined as well, though this evidence is also not a definitive sign of reduced market liquidity. the decline in turnover is not

implementation frameworks and to assess a number of issues related to the consideration of alternative frameworks. i hope the work and ideas presented and discussed over the next two days will spur subsequent research on these issues and promote further collaboration among all of you. as i have often stressed before, in addition to its responsibilities for monetary policy and financial regulation and supervision, the federal reserve takes very seriously its role as a research institution. i want to thank our research conference committee for putting together this high - caliber research conference, which has gathered distinguished speakers and guests from around the world and, i am sure, will add to our understanding of the implementation and transmission of monetary policy. welcome to the federal reserve board. i hope you all have enjoyable and productive discussions over the next two days. bis central bankers ’ speeches