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By: Ken Griffin

Suddenly, everyone’s talking about liquidity. As the Federal Reserve steps back from an unprecedented period of monetary intervention, investors are rightfully focused on the possibility that, after years of relative calm, the U.S. could be in for a period of increased market volatility. There is debate about the role that banks will play as liquidity providers during periods of heightened volatility, and how reforms stemming from the 2008 financial crisis may affect that role.

Missing from much of this debate, however, is recognition of the radical transformation that has taken place in many fixed-income markets as barriers to entry have fallen and new liquidity providers have stepped forward.

Historically, banks have enjoyed a privileged position as intermediaries between buyers and sellers in the fixed-income markets. Unsurprisingly, these banks argue that their position must be maintained in order to facilitate liquidity during volatile periods. This is a myth intended to preserve their competitive moat around what has been a very lucrative business.

Fortunately for investors, recent reforms and regulatory pressures have dramatically increased the number of participants who can make prices and provide liquidity across many fixed-income markets. Markets that have opened to competition now enjoy better pricing, efficiency and resiliency.

In the wholesale U.S. Treasury markets, for example, broader access has allowed many nonbank broke......................

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