Moreover, ETF providers help provide disclosure of liquidity risks and greater freedom to handle redemptions, including enacting “out of the money gates,” paying back large institutional investors in-kind and using short-term borrowing to meed redemptions.
“Liquidity risk management has been part of portfolio management kind of since the beginning of time,” and investors have already adjusted their behaviors, BlackRock co-founder Barbara Novick said in the Bloomberg article.
Nevertheless, BlackRock is proposing new trading reforms to help assuage bond liquidity concerns, reports Jessica Toonkel for Reuters.
The money manager has outlined a new trading protocol for fixed income securities that would more closely match how equities trade with buy and sell orders when matched up. Additionally, the firm suggests delaying the disclosure of large block trades on fixed-income securities to the end of day or lowering the minimum threshold when they need to be disclosed could help diminish market reaction to the trades.
For more information on the fixed-income market, visit our bond ETFs category.
Max Chen contributed to this article.