Liquidity is the lifeblood of financial markets. Its adequate provision is critical for the smooth operation of an economy. Its sudden erosion in even a single market segment or in an individual instrument can stimulate disruptions that are transmitted through increasingly interdependent and interconnected financial markets worldwide. Despite its importance, problems in measuring and monitoring liquidity risk persist.

A) There are several ways in which liquidity can be measured. Describe the key characteristics of liquidity and clearly define its four dimensions. Please outline and justify which trading group would most prefer the liquidity dimension you have described.

B) Identify and describe different sources of dark liquidity

C) Evaluate the benefits and risks of dark liquidity on market quality