Bank issues warning to hedge funds

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, reports the Independent.

In a stark warning to traders who have become complacent again with the assumption that liquidity in financial markets could be taken for granted, Jenkins warned 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," Jenkins said.

He added that "like air and water, market liquidity is no longer limitless and no longer free".

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• Topics
• Hedge Funds
• Regulation
• Bank of England
• Liquidity