Banks pull back from market-making

A lack of OTC market-making is causing concern about long-term liquidity in the energy markets. The future of market-making depends on the banking industry, reports Katie Holliday

Banks' reticence to get involved in market-making, evident since last September, is leading to widespread concerns over liquidity in the energy markets, say experts.

"There has been a huge structural pullback in market making," says Vincent Kaminski, a professor at Rice University.

"Many traders are worrying about marking to market their positions in a market that is becoming less and less transparent for transactions with longer tenors," he says. "Participants that are still active in these