24. Monitoring liquidity horizons - key indicators of the need for review

Liquidity horizons should be reviewed on a regular basis to ensure they remain appropriate, particularly in relation to events or any significant indicators that liquidity conditions have changed in a market, reflecting the possibility for the liquidity of markets to change rapidly as market participants enter and exit asset classes.

Institutions should consider significant changes in the factors used to determine the liquidity horizon as a minimum set of triggers for a review of the relevant liquidity horizon. Any experience of selling a position that indicates a liquidity horizon is not sufficiently conservative should also immediately be taken into account in determining the liquidity horizon for similar products and the procedures for allocating positions to liquidity factors should then be updated accordingly.

Over time institutions should monitor and enhance the range of factors used to identify liquidity horizons based on their market experience.