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Fasten Your Seatbelts: High Frequency Trading Is Coming To The Treasury Market
In what may be the gray swan that all hell is about to break loose, we read that one of the world's largest hedge funds, British Man Group with $58 billion in AUM, is about to launch High Frequency Trading - the same high volume churning, sub-pennying, liquidity extracting, stub quoting and quote stuffing parasitic algorithms that frequently crash the equity, and as of recently the FX and commodity markets, into that most sacred of markets: US Treasurys. The official spin: "The Man Systematic Fixed Income fund, yet to be launched, will try to identify and profit from dislocations in liquid government bond markets." What this really means is that the final frontier of market rationality is about to be invaded by artificial momentum generating algorithms, who couldn't care less about fundamentals, and whose propensity to crash and burn at the worst of times, may end up costing the Fed all those tens of trillions it has spent to keep the Treasury market calm, cool, collected, and largely devoid of any volatility and MOVEment. But all that is about to change: "The unit is run by Sandy Rattray, who co-developed the VIX. VIX volatility index, also known as the "fear index", widely used to measure investors' perception of risk." As a reminder, the VIX index is only relevant when there are surges in volatility, something which we are confident Mr. Rattray will no doubt bring to Treasury trading momentarily.
From Reuters:
"Traditional fixed income investing (is) unattractive," Man's Systematic Strategies unit said in a note, citing "yields close to zero percent, increased credit risk in many government bonds, (and) little upside (and) big downside of being long bonds in (the) current environment.
"Market inefficiencies (are) likely to prevail in fixed income markets, creating investment opportunities."
A spokeswoman said on Thursday MSS was working on the fund and declined to give a launch date.
The fund will be the fourth portfolio run by Man's one-year old MSS unit, which manages $1.6 billion (996.5 million pounds) assets.
Last month Man announced the launch of the Man
Commodities fund, also run by MSS, which uses algorithms to trade 25
commodity futures contracts and also allows human intervention.
And here we were thinking that the only reason HFT has any incentive to participate in a market is to extract liquidity rebates, which of course do not exist in the TSY market. Stepping away from the endless lies of the HFT lobby, the truth is that the permabullish bias imputed by algos in Treasury trading will simply mean that slowly but surely the same low volume meltup in stocks that we have all grown to love, especially between 3:00 pm and 3:30 pm will now appears in the 10 year. Luckily, with a minimum rate threshold on bonds at the 0% bound, it means algos can only melt bonds up so much. Unless of course, some 19 year old computer sciences Ph.D. programmer forgot to tell the vacuum tubes, about to be buying and selling the long bond from you 10,000 times per second, this particular fact.
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Is BATS going to be involved in this? Haha, imagine the possibilities.
I will be so glad when the whole thing derails and takes everything and everyone with it... or a giant astroid smacks the shit out of this rock, hitting the galactic reset-button.
Perhaps next go around whatever species evolves will get it right.
Anything surviving 40 years will glow in the dark.
This will continue as long as the Arabs and Chinese can buy physical gold.
Once that dries up, SAYONARA, SUCKAH!!!
I long for the days of the arbitrage trader - an actual human trader looking for these little moments. But now with the algo nanosecond robots . . .
The next bastion will be straight barter. Move to where stuff you like is and figure out what you're going to produce or service in exchange.
The next bastion will be straight barter.
-------
It's already started in Greece. And guess what? The world didn't end like the big banks said it would.
Large problem with a cashless barter system.....delivery....
I will be so glad when the whole thing derails and takes everything and everyone with it... or a giant astroid smacks the shit out of this rock, hitting the galactic reset-button......
Why are you so angry at the world that you'd wish for such devastation? I can understand your frustration with politics or modern society, but wishing for the Earth to crack in half is bizarre. Let me guess.... libertarian?
Max Fischer, Civis Mundi
I don't personally wish for the end of the human race, only the current financial pyramid scheme. I hope for an orderly solution to our problems, but I think we're beyond the event horizon ... meaning that like escaping from a black hole, an orderly solution is now impossible. The only resolution I can discern is a devastating collapse of the system, a system-wide reset. Such an event is the only hope we have of breaking the stranglehold that multinational banks have on sovereign nations right now. Of course, there's the possibility that satan again rises from the ashes, but at least there would be the chance for a more sound system to emerge. As it stands now, there's no hope for that to occur.
I'm gonna green you b/c that's a comment rooted in intelligence and principle.
However -
The world does not work this way and it never will. "Sovereign nations" are not looking to break the stranglehold of multinational banks; rather, people wanna have fun and watch Dancing With The Stars. There's nothing wrong with that by the way.
Keep in mind that there has never been a time in human history in which things have been pristine and in which justice for all prevailed. That maxim ain't about to change on your watch or mine, no matter how bad one wants it to happen.
I say buy physical. It's the best play you, me or anyone could make from here on out. And enjoy life - things are getting better. They really are.
The parallels to Rome abound.
...Guess what happened when the bread and circuses dried up?
Things are getting better. They really are.
....Tell that to bee's, dieing from GM crop pollen genetically modified to kill em off.
You get a green, too, Max. I like what you are doing and you make good points. We'd all be better off if there were more discussions than pointless, angry rants here.
What good points?
All Max does here is incite all the angry rants you speak of.
Take a look at the comment Max ridiculed, which currently stands at 6 greens to zero. Max did a fine job replying.
Sure some people need to come here and give us their asteriod fantasies, but it doesn't do anyone any good.
You are a PM's guy, Bay - don't worry too much about the "price" of silver. You are doing the right thing. Have fun in the meantime, rather than waiting for the "collapse". No matter what happens, you have something valuable to give to your family.
That's navy's comment to Max. Max did his usual "libertarian' bash just above it. Typical horseshit from him.
Vic, I don't worry about any of that stuff. I just spent two glorious months in Maui. Had a blast everyday.
Live well brother...
There's always a reason, and your right this is going to derail and big.
Negative cobwebbed thinking....rational people will stay alive and a new paradigm will arrive.
Well, well, well.. Here it finally is.
Our Huckleberry..
What could go wrong?
Ben's gonna have to redeploy his divisions. The dreaded Two Front War.
Brought down the NAZI's
guess we need to go long 10y -- fuck me i am shorting the 10y! BUT since at 0% bound we may find the short position actually pays out, over medium term....who the fuck knows anything anymore....
I think a 10 year yield of -0.5% within 18 months is credible.
With or without HFT. There is no growth. Period.
Here comes the bernankOBOT.
Yeah...sure...it isn't bad enough that these HFT hedge fund pricks are causing folks pain at the gas pumps...now, hit them with their credit card interest rates.
WTF is going on? This hedge fund should be attacked relentlessly until it is simply gone from the planet.
Just sayin'...
I beleive that HFT bots and algos are already getting embedded into everyday transactions.
Try booking an airline ticket: as soon as you click the ask price goes up.
Coming soon to false advertising firms and bait-and-switch operations near you!
So you're saying we have choosen the form of the destructor?
That choice was made in 1913.
I stand corrected.
Flash crash the government bonds? Woooo
Imagine all the bonds, insurance policies, swaps...blowing up like string of fire crackers...
Go go go go go go go go HFT!!!
...and mortgage resets.
imagine trying to lock in an interest rate with the bots playing around like they do. mortgage lenders will scream
FUCK YEAH!
Cool. A 6V6 for my tweed amp. Now this site is starting to grow wings.
This is a guitar site, isn't it?
I hear JP Morgan has a huge short position on these.
I just did a repair job on a Tweed Deluxe, actually. Sounded suh-weet with the old RCA 6V6s it had in the power amp.
Funnily enough, the owner is an ex stockbroker. Reckons he got out of it because it had become a case of making money just for the sake of making money. Runs a small recording studio way out in the sticks these days and, if I remember right, raises a small herd of rare breed beef. Not a nice guy other ways, though. Always a bit superior and abrupt with 'peasants' like me. Always queries the bill, too, which I find offensive because I'm one of the cheapest decent amp techs for probably 100 miles.
What does it really matter, interest rates are not allowed to go up. It's that simple.
Maybe they are owned by the same owners of the FED.
Maybe if they crash the Treasury market somebody will finally un-plug all of the HFT bots.
01000110 01110101 01100011 01101011 00100000 01111001 01101111 01110101 00100000 01000010 01100101 01110010 01101110 01100001 01101110 01101011 01100101 00100001
You missed 1
http://www.convertbinary.com/
Churn, Stuff, and Burn...
Maybe they can churn treasuries up to a negative yield and the debt will start paying itself off.
Microsecond Mean Re-versions.
Well the only thing we can know for sure after this news is that Ben is getting really fucked up tonight. To thirsty Thursdays!!
Should these bozo's get a foothold expect enourmous volatility in the equity markets. Cool.
ya right...how long will it take for Barry to declare Mr. Rattray a domestic terrorist, then take action under his Exec Order...??????????
Does this have anything to do with Japan admitting there are an additional 14 reactors in various states of destruction?
http://enenews.com/must-see-report-introduced-by-top-govt-official-hoson...
Thousands of tons of radioactive material in various stages of exposure to atmosphere. And that's only what they admit.
Bond pricing will soon reflect the levels of radioactivity in their respective countries. Let's see if QE can solve this!
So now I get my overtime back? Should i expect GSCX to close at 8-10 pm as was the case during 2008-2009 ?
Awesome moniker !
http://trimtabs.com/global/news_video.htm
ZIRP, FTMFW!
Government bond. Another way of saying taxpayer slavery.
Since natioal debt is growing exponentially, this move is very logical. Soon no human will be able to manage this anymore, we need growing number of HFT-farms to handle this.
Bunga - Exactly. With all the printing and CB buybacks....there should be no liquidity issues.
The Chinese will start copying (acquiring by grey market means?) the algos to fine tune them with 100 Phds from Western Universities on the job !
The Man .......... Systematic Fixed Income fund
Well I guess this gives us a clue about who THE MAN is (or will be)
this is the government. they have a plan to keep interest rates low, and make it look like the auctions never fail.
When all human behavior is stripped from the markets, yes they will have what they want. A perfectly controlled machine for their propaganda engine.
One could well conclude this was the goal all along.
HFT has been in this market for years already. The notion that they are only now entering is completely off-base. Guess who already does the most volume in this space??? you guessed it, HFT
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If they screw things up badly enough they will have little choice but to start over from scratch.
On the basis of that alone -- I must approve.
...correct me if i'm wrong but the HFT algos don't play at the long dated JAN 2013 put options I bought on AAPL a few weeks ago... now up 87.32% over my buy price.
There is still money to be made out there. especially when Herd Like Idiots buy the hell out of a bloviated company that on paper is worth more than the entire US retail sector, with just two mid product life cycle products.
Cheers
We don't know who struck first, us or them. But we do know it was us that scorched the sky. At the time, they were dependent on solar power. It was believed they would be unable to survive without an energy source as abundant as the sun.
HFT THIS!
Ok so you're in Walmart and you reach for a can of beans because of the "everday low price". Only as soon as the magnetic field around the can is penetrated by your reaching fingers, the price goes up 5%. They know they got you cause you figure you're already in the store, and you do need the beans, and heck you're not gonna get back in the car and drive to another store when you're so short on time already......
So you decide you might as well get two cans before the price goes higher. And then it does.
Want to take bets this shit will get shut down?
would you rather have $5,000,000.00
or??
$0.01 that doubles every day for a month?
this should help everyone understand sub penny roll over..
Day 1: $.01
Day 2: $.02
Day 3: $.04
Day 4: $.08
Day 5: $.16
Day 6: $.32
Day 7: $.64
Day 8: $1.28
Day 9: $2.56
Day 10: $5.12
Day 11: $10.24
Day 12: $20.48
Day 13: $40.96
Day 14: $81.92
Day 15: $163.84
Day 16: $327.68
Day 17: $655.36
Day 18: $1,310.72
Day 19: $2,621.44
Day 20: $5,242.88
Day 21: $10,485.76
Day 22: $20,971.52
Day 23: $41,943.04
Day 24: $83,886.08
Day 25: $167,772.16
Day 26: $335,544.32
Day 27: $671,088.64
Day 28: $1,342,177.28
Day 29: $2,684,354.56
Day 30: $5,368,709.12
all credit too this wonderful site that made sure I didnt have to do the work myself! http://www.al6400.com/blog/2006/07/10/a-penny-doubled-everyday/
now imagine how many trades you have a second.. how many a day.. how many a week.. and thats it! POOF!
No one cares if any stock is good or bad.. the best stock is a stock you will move in and out over over and over and over again!
and the more traders moving.. the better!
the house always wins!
In this association, the venerable vacuum tube is being so maligned here.
Oh the drama. Some fool fat fingers a futures contract and it's a machine takeover. Spare me.
Zero bound is the limit? No. We have already gone negative on the short end. Of course we can go negative longer out. And what do you think the govenment will do? Limit what you can withdraw.
The official spin: "The Man Systematic Fixed Income fund, yet to be launched, will try to 'manipulate the markets and then' identify and profit from dislocations in liquid government bond markets."
There, fixed it...
They will always keep looking for the cows that haven’t been milked and the sheep that haven’t been sheered. Next thing you know they will be selling life insurance to Gerber babies. Too late.
And if we can't identify them we will create them.
This is going to be fucking awesome
going way long popcorn futures
Bullshit. I have a super-duty 5001 HP hard drive with a pentium 9000 chip. I have added a super-charged voltage modifier for monster volume days with a nitrous pump if I need the extra juice. I just guzzled (2) 20 oz Red Bulls and 5 dexadrine and soaked my fingers in bacon grease and sprayed WD-40 in my eye sockets. Bring it on Bots!
Ref: http://www.advancedtrading.com/algorithms/218401501 [Advanced Trading?]
http://www.bis.gov.uk/assets/foresight/docs/computer-trading/11-1226-dr7... [Indeed, the British are coming with some "Webbed Finger's"?]
http://www.cut-the-knot.org/do_you_know/zipfLaw.shtml [Logic/Probability/Randomness/Non-Linear/Functionality? ___ do you know who's sleeping with your algo?]
HFT's are a flash-crash away from happening simultaneously around the globe,... at a frequency unprecedented - in a future that hasn't even given birth to its fist generation algo-stein abomination. Just ain't gonna make it past 2nd base. JMO
Talk about going down the tubes...
Let's be honest here, the only reason why HFT/Algos are allowed to corrupt and destroy the market is because central planners have control by just merely saying something on the wire or repeating the same bullshit lines from a previous speech.
This is how freedom of most things we knew in life: choice (financial and otherwise) is eliminated systematically.
Where are our hacker friends now?
FYI, people have been running algos on the TSY and even the cash bond market for about a decade now. I personally spent 3 years click trading and running low latency algos in the TSY market. You can't actually run a true high frequency or low latency system in the cash bonds because of the way the matching engines of the two primary electronic exchanges for cash bonds (Brokertec & Espeed) work. You CAN arb gaps in the slower and more illiquid cash bond markets against the must faster TSY futures markets though. All in all this post gets a big one of these from me.
http://forum.cheatengine.org/files/who_gives_a_shit_541.gif
kudos bmoc - I was not finished typing before you posted.
Tyler - Well...this is interesting...but the article asks more questions than it answers. The current (electronic) ECN structure in FI market has a whole set of different execution rules than the Equity, FX, or futures market. I am assuming that the article is speaking of cash Treasuries.
Most of the ECNs have execution rules like "work ups" (that can "freeze" the prices for 1 -3 seconds) etc.,, that would somewhat prevent true HFT (similar to single millisecond execution latency that presently exists in EQs and FX ECNS) to be facilitated. The UST markets are still really quoted and traded large by the big banks. They ...perhaps up to now...have dictated ECN trading rules / logic, with perhaps their best interests in mind....ahem.
So when you quote the Man as saying " will try to identify and profit from dislocations in liquid government bond markets."....what would be that venue and trading process be? There are also possible "Clearing" issues that would come to the fore.
Details are needed my "Man"...details....before one can "illicit" an opinion.
Totally agree. In the cash market the primary dealers developed the electronic trading along the line of their OTC model. Will be very hard to execute HFT type trades. Doing HFT trading in treasury futures and how it will impact the cash market I don't know.
hft's - as the momentum of the body [.....] is the product [-----] of its mass [.-.-.] by its's velocity [?_?_?].
Gsell (2008) / Algorithmic Trading Engines vs. Human Traders __ great thesis,... jmo http://www.ecis2009.it/papers/ecis2009-0026.pdf
Bring it on. Maybe the true cost of debt (interest rates) will be discovered and likewise the true value of gold.
Fed front running: now done in milliseconds.
the fed's 'gravity', can slow-down, or even "stop[watch?]" time!
were all fucked til the frb goes bust, period!