CGFS issues recommendations for the design of liquid markets

Press release  | 
11 November 1999

The Committee on the Global Financial System (CGFS) is releasing today a document entitled How should we design deep and liquid markets? The case of government securities. The note identifies general principles and more specific policy recommendations relevant to the promotion of liquid government securities markets. These principles and recommendations arose from discussions within the Committee and are based partly on an earlier CGFS report, Market Liquidity: Research Findings and Selected Policy Implications, which was published in May 1999.

Following the recent financial crises, there is a growing consensus that deep and liquid financial markets are needed to ensure a robust and efficient financial system. To that end, the note identifies five guiding principles for the design of deep and liquid markets: a competitive market structure; a low level of market fragmentation; low transaction costs; a sound, robust, and safe market infrastructure; and heterogeneity of market participants. In many countries, government securities markets are at the centre of the financial system, so liquidity in these markets is especially important. For this reason, five practical policy recommendations for government securities markets are discussed, dealing with debt management strategies, taxation, transparency of issuance and trading information, trading rules and infrastructure, and the development of related markets.

The document does not advocate specific steps for any particular government bond market, nor should it be considered a code of good practice. Rather, it is intended as a set of guidelines reflecting measures that have been found to be successful in enhancing market liquidity. While the issues discussed are based on the experiences of mature markets, they would be applicable to any country attempting to develop and secure properly functioning government bond markets. The note is available on the BIS website (

Note: The Committee on the Global Financial System is a central bank forum, established by the Governors of the G10 central banks, for the monitoring and examination of broad issues relating to financial markets and systems with a view to elaborating appropriate policy recommendations to support the central banks in the fulfilment of their responsibilities with regard to monetary and financial stability. In carrying out these tasks, the Committee places particular emphasis on assisting the Governors in recognising, analysing and responding to threats to the stability of financial markets and the global financial system.