How A High Freak Algo Halted Bond Trading For 5 Seconds During Friday's Payrolls Release

Tyler Durden's picture

It's just sad now: with every passing day bringing new (and previously unseen) cases of high frequency trading algo-generated market halts or crashes, that none of the regulators are willing to take a stand against this market scourge that we have written about for nearly 5 years now, is a clear indication that the HFT lobby is firmly in control of what were once "capital markets" and that the retail investor is once again, the sacrificial lamb. But while it was one thing for the high freak thugs to control marginal price action through momentum ignition, quote stuffing, hide not slide, flash trades, and all the other well-known manipulative techniques which seemingly are too complicated for the SEC to figure out, in equities where things get really bad is when HFTs start crashing, or at least halting, the bond market at key market inflection points such as during the most important monthly data release, the payrolls release. This is precisely what happened on Friday, when as Nanex clearly shows, a momentum ignition algo sent the ZF (5 Year T-Note future) soaring and resulting in a 5 second - an eternity in today's nanosecond age - trading halt during the actual release of the BLS report.

How this kind of manipulation continues without penalty, and how this same party can keep getting away with this  - recall from June, "Here Is Today's 482 Millisecond NFP Leak, The Subsequent Gold Slam And Trading Halts In Treasurys And ES" - is just too mind-numbing to consider any more.

Here is the criminal action from Friday, in pretty charts, courtesy of Nanex:

On January 10, 2013, about 8/10ths of a second before the Labor Department released the widely anticipated Employment Situation Report, trading activity exploded in Treasury futures, sending the prices much higher in less than 1/10th of a second. The buying activity overwhelmed the 5-Year T-Note market causing a stop logic circuit breaker to trip and shut down trading for 5 seconds. During the halt in 5-Year T-Note futures, the news was officially released in Washington, D.C. - meaning that anyone wanting to trade on that news, would have to wait until the halt was lifted almost 4 seconds later (4,000,000 microseconds in high frequency trading lingo).

This isn't the first time that Treasury futures have been halted (see also 08-Nov-2013 and 07-Jun-2013); however, before June 2013, this was an extremely rare event.

2. All Futures Trades - showing that trading activity before news release was higher than after news release!

3. March 2014 5-Year T-Note (ZF) Futures. Zoom of Chart 1.

4. March 2014 T-Bond (ZB) Futures.

5. March 2014 10-Year T-Notes (ZN) Futures.

6. March 2014 2-Year T-Note (ZT) Futures.

7. March 2014 2-Year Minus 5-Year T-Note (TUF) Futures. This contract also halted for 5 seconds (due to the halt in the 5-Year leg).

8. March 2014 Ultra T-Bond (UB) Futures.