Rufus, Yes, my brothers group does the same thing (not DRW, a much smaller group), their theo engines compute fair value and the trader executes. I am actually based on the CBOT floor in between the 30-year options and futures pits, and I overheard one of Donnie's traders saying they do have guys trading the basis and yield curve spreads with TT, not sure how big of an operation it is. They used to have a trader in the 2-year pit when the volume was in the pit, but he is no longer in there. Mike Curto
mike - interesting post as always. taking this idea to the next level.... why isnt the big money just going fishing then - running the market a few ticks to bring the volatility back, screw the machines and take the bunce? its a dog eat dog world afterall.
Mike, good info, it has been a while since I talked to fred schuster and those guys (over a year). Their operation is well run. In a way, I won't be surprised if DRW started trading the basis, they have the capital, after all. Actually, one second ... I could look it up! I believe DRW is definitely trading the basis, they are a participant on BrokerTec (I still have some good contacts there), I just looked it up. Interesting, they were talking about BrokerTec integration a year and a half ago. Heh, I guess that's what capital can do.