There are two major issues:
1) the risk of price shocks due to the lack of liquidity -
“There will be discontinuous pricing,” says Richie Prager, head of trading and liquidity strategies at BlackRock, the largest asset manager in the world. “Anyone who doesn’t expect some sort of discontinuous pricing as interest rates normalise, as volatility returns, is really just not realistic.”
2) the intermediation role that is now unfulfilled
"Anecdotally, traders say they used to step in during volatile price swings to help clients, with the aim of securing more business for when markets were calm. It was part of the client relationship. As banks have reduced balance sheets and declining fixed income revenues, the incentive to step in during market turmoil has been reduced".
There is a real risk of market gyrations and of a new form of intermediation to reduce the thereat of these price movements.
'via Blog this'
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