Came across a web site that says that dealers front-run customers a lot in cash Treasury market. Does anyone know if it's as common in bond futures?
perhaps putting on a squeeze by buying the cheapest-to-delivers, and when the unlucky holders of futures contracts need to purchase that particular bond in the cash market, the supply is tight, and obviously, when supply is tight, these poor folk pay out the a$$ for the "cheapest" to deliver bond... there's a news story on my bloomberg i seem to recall (it might have made it onto bloomberg.com, but i saw it on the terminal).. another area of abuse is the bond repo (repurchase) market. Dealers use their inventory to get cash to support their trading, and there's a few tricks that are played in that market as well.