Bank regulator warns hedge funds of crunch clampdown
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Thursday 21 June 2012
The Bank of England regulator Robert Jenkins yesterday warned senior hedge fund managers to beware of a potential massive clampdown on their trading activities if the eurozone crisis triggers a return to the kind of liquidity crunch that followed the collapse of Lehman Brothers.
In a stark warning to traders who have become complacent again with the assumption that liquidity in financial markets – the willingness of investors to buy and sell assets – could be taken for granted, Mr Jenkins, pictured, warned that this may not be the case.
"Short-term traders count on it; algo [algorithmic "black box"] trading depends on it. Long/short strategies presume you can short...
"But here's the thing: confronted with sudden surges in cross-border flows, elected government will attempt to intervene in the interests of stability generally and to protect their taxpayers specifically, " Mr Jenkins said.
He added that "like air and water, market liquidity is no longer limitless and no longer free".
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