The Bobler: Watch As An HFT Algo "Trades" German Bunds

Tyler Durden's picture

For the longest time it was thought that high frequency traders and their algos were mostly focused on equities due to the ease of accessing equity markets and getting priority data feeds which permit a certain class of traders to scalp and/or frontrun order blocks all the while hiding in the guise of providing liquidity (liquidity disappears the moment there is a major market shock and when it is needed more than ever).

Curiously, in the past year it has became very clear that the asset class where the growth of HFT has been most pronounced is not in equities but in FX - perhaps linked to the tidal departure of all carbon-based FX traders all of whom it now appears were engaging in gross "chat room" mnaipulation - and to a lesser extent, options. But one place that seemed somewhat immune from the ravages of the constant millisecond back-and-forth churn and quote stuffing known as high frequency "trading" were bonds. No longer.

As the following several charts from Nanex document conclusively, HFT has now officially entered the bond trading house, in this case the German Bund treasury house: earlier today, May 29, just after 9:45 am EDT, an algo ran on 3 futures contracts on the Eurex exchange impacting the June 2014 contract in both the Bund (GBL), the Bobl (GBM) and Schatz (GBS). 

1. Bund (GBL) Trades and quote spread over 30 seconds of time.

Each trade at the offer is followed by a trade at  the bid. There are 1,445 trades representing 1,468 contract shown in this 30 second period of time.

2. Bund (GBL) quote spread - zoomed out to 17 minutes of time.

The lower panel shows a count of trades each second. Note how it remains constant during each of the 3 or 4 instances.

3. Trades in the most active Eurex Futures.

Three contracts stick out - GBL, GBS and GBM.

4. Showing GBL, GBS and GBM.

Note the constant 150 trades per second during the 3 (or 4) groups.

5. Zooming in on 6 minutes of time.

In the first and last groups, only GBL and GBM were active, while the middle group (starting at 9:47) includes GBS.

6. Zooming in on about 30 seconds of time. 

7. Zooming in on 4 seconds of time. 

8. Zooming in on 1 second of time.

* * *

And as more and more bond trading is dominated by HFT, we can all look forward to a May 2010 flash crash event taking place not in the S&P500, but in the sovereign bond market.