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.

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Thu, 05/29/2014 - 15:43 | 4807034 HedgeAccordingly
HedgeAccordingly's picture

Gobble. Gobble.. these guys are smart! .. 

Thu, 05/29/2014 - 15:50 | 4807058 AccreditedEYE
AccreditedEYE's picture

Ya, people get all worked up over the algo trading and, for what?? No crash, no massive selling frenzy. ZH & HFT has been like boy who called wolf and called wolf and called wolf get the point.

I must admit tho, I'm surprised nobody has figured out how to mind fuck these algos so bad that they become forced sellers and hand some very smart, very short quant a fortune in profits.

Thu, 05/29/2014 - 19:43 | 4807902 o2sd
o2sd's picture

I must admit tho, I'm surprised nobody has figured out how to mind fuck these algos so bad that they become forced sellers and hand some very smart, very short quant a fortune in profits.

And with that one sentence you demonstrate that you know nothing about how HFT works. 

Thu, 05/29/2014 - 20:34 | 4808059 BrosephStiglitz
BrosephStiglitz's picture

Three ways to fuck an HFT firm: 

- Open another HFT on a marginally faster feed;
- Somehow unravel the laws of physics;
- Or my personal favorite- destroy investor confidence in the market to the point where every non-HFT investor exits and the market just flatlines.

HFT firms do a great job of gutting the market from the inside out.  They are the rot that spreads through the core of the tree, causing it to topple at some point in the future.

Thu, 05/29/2014 - 22:03 | 4808338 medium giraffe
medium giraffe's picture

A strange game. The only winning move is not to play. How about a nice game of chess?

Thu, 05/29/2014 - 15:44 | 4807037 Godisanhftbot
Godisanhftbot's picture

 these charts are bullshit. they explain nothing.


 wtf is the point of buying the offer and selling the bid.



Thu, 05/29/2014 - 15:50 | 4807059 Theta_Burn
Theta_Burn's picture

No point whatsoever, except the precision and speed at which it was accomplished.

Are you not entertained?

Thu, 05/29/2014 - 20:19 | 4808020 Mac Sledge
Mac Sledge's picture

1468 * -10€ = ~14.7K€ loss in 30 seconds.

Roughly -500€ per second, über fills!


Thu, 05/29/2014 - 15:50 | 4807060 Tyler Durden
Tyler Durden's picture

The charts are not meant to "explain" anything - they are meant to show HFT activity (the reasons behind it are only clear to the 20 year old math PhDs who have programmed them).

As for what the point is of churning the bid ask, especially inverted, ask the buyers of Knight Capital who bought it for pennies on the dollar after a malfunctioning algo destroyed the company after doing just this, as explained in This Is What Happens When An HFT Algo Goes Totally Berserk And Serves Knight Capital With The Bill

Thu, 05/29/2014 - 16:03 | 4807092 Godisanhftbot
Godisanhftbot's picture

 yes, well , I learned more about hft from Flash Boys, than I did from 1000 Nanex charts.

 We need reasoning, not reportage.


Thu, 05/29/2014 - 16:28 | 4807206 Toolshed
Toolshed's picture

So, what you are saying is, that you are the financial data equivalent of a welfare queen and it's ZH's obligation and responsibility to spoon feed info to you in single syllable chunks so your tiny brain can process it, or pay someone to exsplain it to you. Maybe you would feel more comfortable hanging out with the cartoon bears over at Minyanville.

Thu, 05/29/2014 - 16:51 | 4807329 Sunshine n Lollipops
Sunshine n Lollipops's picture

Hey, I learned a lot from those bears.....

Thu, 05/29/2014 - 18:00 | 4807575 Godisanhftbot
Godisanhftbot's picture

 No, what I meant was folks like you are amused at details of events that mean nothing without context.

 I'm actually interested in making money, while you are simply whacking off to market noise.


Thu, 05/29/2014 - 20:41 | 4808083 BrosephStiglitz
BrosephStiglitz's picture

Glad you're "interested in making money", we were all sat here thinking that wealth just happened.  Let us know how that goes for you, and enjoy paying your tithe to your HFT overlords.

PS: "market noise" should not trade on nanosecond scales.  It should be obvious that this steps way beyond the boundary of human capabilities to process and act on information. 

Thu, 05/29/2014 - 21:40 | 4808258 Godisanhftbot
Godisanhftbot's picture

10 hft scum voted neg.

Thu, 05/29/2014 - 16:59 | 4807361 disabledvet
disabledvet's picture

Sweet Mother of Pete! The Tylers have been grayed out too!

"You killed my pet turtle mister! You're gonna pay for that!"

Thu, 05/29/2014 - 15:55 | 4807072 buzzsaw99
buzzsaw99's picture

 wtf is the point of buying the offer and selling the bid.

i was going to ask knight capital that very question. lulz

Thu, 05/29/2014 - 16:05 | 4807093 ebworthen
ebworthen's picture

Godisanhftbot said:  "wtf is the point of buying the offer and selling the bid [?]"

Matching the resonant frequency with enough volume to shatter the wine glass:

Thu, 05/29/2014 - 16:30 | 4807214 Stoploss
Stoploss's picture

The charts are documentation, that's all.

You know, dates, symbols, time stamps, etc.

Useless shit like that..

Thu, 05/29/2014 - 15:52 | 4807063 ebworthen
ebworthen's picture

"Supplemental Liquidity Providers", hmmm, sounds kind of like a suppository or Ex-lax.

Thu, 05/29/2014 - 15:53 | 4807068 Notsobadwlad
Notsobadwlad's picture

Ya know what bothers me more than HFT?

The flood and fire in the basement of the DTCC and understanding whether there are any hard records left detailing who owns what; equities, deriviatives, bonds ... etc.

My guess is that they have no clue ... or maybe they intentionally have no clue.

Thu, 05/29/2014 - 16:18 | 4807164 GolfHatesMe
GolfHatesMe's picture

Kinda like when they couldn't (wouldn't) price the Lehman CDS issued by AIG for three days after the due date

Thu, 05/29/2014 - 15:57 | 4807080 Bernoulli
Bernoulli's picture

What amazes me is that in such a world, options are still "priced" looking into the past.

Complete ignorance of what could happen in the future.

Looking forward to the moment when the machines get turned off... humans

Thu, 05/29/2014 - 15:58 | 4807082 Jumbotron
Jumbotron's picture

Go long Nvidia.  They are the ones manufacturing the GPU's that are used to crunch the HFT's algorithms.

Intel CPU's can't handle this kind of math at this speed.  They are too busy coordinating the rest of the computer and scheduling tasks.

GPU's have become uber math co-processors and are way cheaper than special use FPGA (field programmable gate array) which could be programmed as DSP' (digital signal processors) as well as math processors.  But GPU's are GREAT at this kind of number crunching.

Just look at the shortage in AMD's high end cards for the Bitcoin tards.  AMD's cards have an edge on Nvidia's cards because they focus on a different kind of number crunching which gives Bitcoin miners the edge. 

GPU's.....not just for World of Warcraft anymore.

Thu, 05/29/2014 - 16:03 | 4807091 LawsofPhysics
LawsofPhysics's picture

Floating point speed bitchez...

Thu, 05/29/2014 - 16:19 | 4807169 Theta_Burn
Theta_Burn's picture

I'm rocking a GTX-780 at the moment

Thu, 05/29/2014 - 17:12 | 4807407 Jumbotron
Jumbotron's picture

Meh....just cash out your IRA and buy this beast.....

And this is a GAMER card.  I can't imagine how much the Quadro Professional version of this would run.  This is what the HFT's use....the Quadro models.

Thu, 05/29/2014 - 18:08 | 4807605 MrFailSauce
MrFailSauce's picture

GPUs are great, but only if there is a linear approximation of your model.

Fri, 05/30/2014 - 07:30 | 4808882 firstdivision
firstdivision's picture

Better value in scooping up used PS3's off Ebay and chaining them together.  The Cell was much better at number crunching.

Thu, 05/29/2014 - 16:05 | 4807098 LawsofPhysics
LawsofPhysics's picture

Pure idiocracy.


OT, but can anyone comment on the status of the "SDR" and whether or not the BRIIC nations are still on board?  Seem to me that not just one but several currency failures are in the works.

Thu, 05/29/2014 - 17:04 | 4807378 disabledvet
disabledvet's picture

"WE'VE GONE SUPERCRITICAL AGAIN EINSTEIN!!! SUUUUUUUPER CRITICAL!" (oh, wait...he's a friggin physicist....BARELY. At least he was smart enough to stay in the formula department. Friggin Teller on the other hand...

Thu, 05/29/2014 - 17:55 | 4807558 MrFailSauce
MrFailSauce's picture

I see a lot of complaints that the markets don't seem to make sense. (With an assumed premise that they once made sense, in the days of yore, before fed manipulation.)

An alternative hypothesis:

If the algos are actually working correctly, and making markets more efficient,  then the efficient markets hypothesis says that market prices should not make sense.  Any pricing pattern, particularly on short time scales, gets arbitraged away, so the prices just random walk.  I'll give you, that "if algos are working correctly" is a big if, but just a reminder that there is a very mainstream hypothesis that could be considered consistent with these data.

Thu, 05/29/2014 - 18:02 | 4807585 Godisanhftbot
Godisanhftbot's picture

 Don't confuse the children with facts.

Fri, 05/30/2014 - 21:24 | 4811675 o2sd
o2sd's picture

HFT doesn't make the market more efficient. It doesn't add liquidity. HFT firms don't "make markets".  In fact, the indicators of market efficiency have declined since the rise of HFT. Markets have become shallower, even as prices rise. That is the opposite of market efficiency, it is market fragility.


Thu, 05/29/2014 - 19:36 | 4807872 Herdee
Herdee's picture

Knight Capital and UBS for at least a decade were tied to naked short selling and destroying thousands of U.S. start up companies on Pink Sheets and the OTC Nasdaq markets.They literally helped destroy innovation in America along with millions of jobs.

Thu, 05/29/2014 - 21:38 | 4808250 Godisanhftbot
Godisanhftbot's picture

really, you can destroy a start up with a legit product? they didn't do a very good job, plenty of jive co's still around.

Thu, 05/29/2014 - 21:37 | 4808247 Godisanhftbot
Godisanhftbot's picture

 no problem. just keep humping those nanex charts, think you now have insight, and don't demand to know wtf was actually happening.

 you remind me of natives in loincloth,  pointing to the sky as the plane goes by, saying ooh, ooh, ahh.


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