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Fat Finger Sends Long Bond Futures Soaring In Overnight Trade

Tyler Durden's picture


Anyone who had the pleasure of trading the long bond March future ZB H4 just before 1:40 am Central witnessed one of the more abnormal fat fingers seen in recent months, one that did not involve equities but instead was all bond.... long bond, which soared from 130 to over 135, after a large clip was traded on what was apparently an erroneous buy order put through during very illiquid trading. Then again, with no trades busted by the CME (yet), maybe it was intentional.

They saw this:


And, zoomed in, this.

It is unclear who or why executed the fat finger: we expect to learn more today, although we do know that a move like this during regular trading hours would have had an unprecedented and very adverse impact on not only bonds, but absolutely all risk-chasing asset classes. Let's just hope it's not a test, and certainly not a harbinger of what's in store for bond traders now that HFT algos have firmly moved into the asset class and where "price action" is determined solely by what someone else's "price" does.

Update: The CME will "revise" all trades above 131.12 down.


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Mon, 12/23/2013 - 08:25 | Link to Comment Capitalist
Capitalist's picture

If GS did it, all trades will be reversed.

Mon, 12/23/2013 - 08:32 | Link to Comment French Frog
French Frog's picture

Xmas just wouldn't be the same without a fat finger...

Mon, 12/23/2013 - 08:38 | Link to Comment NoDebt
NoDebt's picture

From the overnight market recap, this just in:

Later the CME said that all trades in ZBH4 above 131-12 will be adjusted to 131-12, UBH4 above 140-17 will be adjusted to 140-17.

So there.  All fixed.  Be honest, did you really have any doubt?

Mon, 12/23/2013 - 08:41 | Link to Comment GetZeeGold
GetZeeGold's picture
 least we can rule out the EPA/CIA guy as being the fat finger.

Mon, 12/23/2013 - 08:51 | Link to Comment slotmouth
slotmouth's picture

I have a theory.  Chinese central bank is adding liquidity by selling treasuries.  Their holdings of US treasuries dropped in June when they experienced their first cash crunch.  Shibor is spiking again and the Chinese central bank has been adding liquidity, but where is it coming from?

Mon, 12/23/2013 - 08:57 | Link to Comment disabledvet
disabledvet's picture

I have a theory too.

Mon, 12/23/2013 - 09:10 | Link to Comment eddiebe
eddiebe's picture

They have what we would call the printing press. Why spend treasuries to make renminbi? They use $ to buy hard and soft assets.

Mon, 12/23/2013 - 12:12 | Link to Comment Stoploss
Stoploss's picture

Something happened big across every single currency last Thursday.

Why, they all look like the long bond trade 'fat finger' infiltrated all the currencies late last week.


Must be a virus... LOL!!!

Mon, 12/23/2013 - 08:28 | Link to Comment firstdivision
firstdivision's picture

Someone needs to inform K-Hen that Pomo hasn't started yet.

Mon, 12/23/2013 - 08:28 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

It was just a HFT midnight snack. The heartburn is gonna be killer.

Mon, 12/23/2013 - 08:57 | Link to Comment disabledvet
disabledvet's picture

nothing see here. move along...move along...

Mon, 12/23/2013 - 08:29 | Link to Comment RabbitChow
RabbitChow's picture

Was this the 10 year?  Harbinger, or Hindenburg.

I'm sure there's nothing to see here  Move along, move along.

Mon, 12/23/2013 - 08:32 | Link to Comment NoDebt
NoDebt's picture

Invert the graph, wait 31 minutes and you have gold's chart.

Mon, 12/23/2013 - 08:40 | Link to Comment A82EBA
A82EBA's picture

a 4% stop hunt on gold?

Mon, 12/23/2013 - 08:41 | Link to Comment Pig Circus
Pig Circus's picture

So Algo's are still broken but only on the upside.

Mon, 12/23/2013 - 08:41 | Link to Comment Haloween1
Haloween1's picture

These fat fingers are getting to be a daily (or nightly) thing.   They should get rid of that guy.  OR, Maybe they're not FF's at all?

Mon, 12/23/2013 - 08:47 | Link to Comment buzzsaw99
buzzsaw99's picture

just a glitch in the matrix. nothing to see here, move along.

Mon, 12/23/2013 - 08:50 | Link to Comment eddiebe
eddiebe's picture

You know what you can do with that fat finger.

Mon, 12/23/2013 - 08:51 | Link to Comment blindman
blindman's picture

mirrormirror says:
December 23, 2013 at 10:40 am
23.12.2013 – anniversary of … “The 100 Year Theft”

“If America Doesn’t ABOLISH The FED, The FED Will ABOLISH AMERICA” | G. Edward Griffin

24 mins. … well spent.


Mon, 12/23/2013 - 08:55 | Link to Comment magne13
magne13's picture

The CME cannot just pick an arbitrary  number to adjust trades to, in fast market conditions or any condition for that matter, there is not a daily price limit for the bond future.  As a hedger you rely on the prices and the trade confirmations and in doing so putting on trades with vital price and confirmations should be upheld.  The fact that a single order or any order can drive illiquidity like this demonstrates the lack of integrity in any market, if the CME group adjusts any of these trades, I believe lawsuits will be coming.  As a speculator, what do I care what someone elses order is, rather I rely that the market is where it says it is especially when actively trading and getting active confirmations, which are instantaneous in electronic market places.  I sold bonds at 133-29 and I will not allow the CME to adjust any of my fills.  They are the clearing group and must stand behind the trades, period.  IF they do not, then I guess I will just create an algo to run all night buying up 3k lots and running the market up and down running over who ever in the mean time and knowing full well I am not going to be on the hook for any outrageuos price movements.  What a joke.

Mon, 12/23/2013 - 20:19 | Link to Comment Barry McBear
Barry McBear's picture

I think you and RevolutionDD (post below yours) are on opposite sides of an interesting debate.  I am on your side of the debate as I too am a human liquidity provider in times of panic.  The CME and their busting / re-pricing trades plays a huge role in reducing liquidity and in turn causes more of these flash crashes/smashes.  Why should you or I take the other side of a crash/smash when if we're right and it was a temporary move the CME will re-price our trade taking away all our profit, but if we're wrong and some legit news drove the move (terrorists, central bank action) we get crushed.  The CME creates an all-risk/zero-reward trade to anyone who wants to provide liquidity in situations like this. 

While I appreciate Revolution's points, and understand what he's saying, I think he could see that if the CME simply made a commitment to NEVER alter the price given, that there would be far more liquidity in the market, particularly at outside prices looking for lucky fills, and as such these crash/smash events would be far less often and far less severe.  

How does non-farm routinely trigger the circuit breakers but not this situation?  Broken market.

Mon, 12/23/2013 - 08:57 | Link to Comment revolutionDD
revolutionDD's picture

The markets have been absolutley corrupted. For the CME not to break what is an obvious manipulation of the long bond market will be the final straw for me. As a seat holder on the CME and witnessing the transformation of markets over the last couple of years for the sole benefit of HFT manipulated cronies to the detriment of actual liquidity providers has eliminated whatever faith I had left in the system. Fat finger my ass! If CME does not break this obvious manipulation, maybe a law suit will shed some light on these criminal cartels. Think there are any hungry securities attorneys looking for cases against big money defendants?


Mon, 12/23/2013 - 09:04 | Link to Comment disabledvet
disabledvet's picture

you're only getting this now?'ll be suing the Fed to "put back the ten billion in stimulus." This program (Zero Bound Rate Policy) is winding down leaving only the HAMP as the last o the "emergency measures." Good luck winding that one down.

Mon, 12/23/2013 - 09:16 | Link to Comment Quinvarius
Quinvarius's picture

Any taper must be matched 10x with secret interventions and bailouts.  Taper is expensive.

Mon, 12/23/2013 - 09:24 | Link to Comment orangegeek
orangegeek's picture

I picked my nose while reading this.


And this is all I have to say.

Mon, 12/23/2013 - 09:30 | Link to Comment blindman
Mon, 12/23/2013 - 09:49 | Link to Comment medium giraffe
medium giraffe's picture

Too much Sherry, Santa?

Mon, 12/23/2013 - 09:52 | Link to Comment LooseLee
LooseLee's picture

Pinko Commies at the desk early this morning---gotta 'CONvince' the sheep all is well....

Mon, 12/23/2013 - 10:11 | Link to Comment WhiteNight123129
WhiteNight123129's picture

Long bonds are where the weakness lies.


Mon, 12/23/2013 - 10:32 | Link to Comment highwaytoserfdom
highwaytoserfdom's picture

revolution nailed it.  Everyone knows it.    How you fund lawsuits against primary dealers?  Selling Yellen surly smelling. Seat prices are high lease until flush. Sell high buy low.

Mon, 12/23/2013 - 23:01 | Link to Comment SuperCycleBear
SuperCycleBear's picture

Mum and Dad (retail) shorts have been squeezed and stopped out. Now the real selling can commence in earnest! 

Thu, 12/26/2013 - 08:47 | Link to Comment Wish Doctor
Wish Doctor's picture

If all trades above X were canceled, then the stopped-out prior short positions (and the "stopped-in" new long positions) should have mostly all (not the ones straddling the ZB and UB strike levels) been cancelled out and no losses incurred except maybe for the round-trip commish.

What about bogus options trades on ZBH4 or the exchange-traded NOB spread =/ZBH4-/ZNH4?  Just like silver follows gold, ZN follows ZB.   What about the bogus ZN?  Or Eurodollar?  A fake 5-handle move in ZB caused shock waves all over.  Oh well, at least they know there are two futures for long treasuries, ZB and UB both.  And there's hardly any volume in the calendar spreads for treasuries.

If you're playing in a casino where all the games are rigged, why would anyone (except a gambling addict) play unless they're getting (or giving) the rigging instructions?

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