One smoking gun for the Fed's market liquidity concerns
One smoking gun for the Fed's market liquidity concerns was identified by a WSJ report about the drop in liquidity on E-mini S&P 500 futures nearly back to levels of the financial crisis. Since last year's market volatility the futures have lost some depth, which could impact their sensitivity to one-way moves. Order-book depth hit its lowest level in a decade during December's swings and remained near those low levels ever since, surprisingly despite some semblance of calm returning. Liquidity during the London session in particular has "fallen dramatically" (Brexit concerns?). There may also be a shift away from transparent exchange trading by large market makers to avoid showing their hands and moving the market.