Government Deficit - Bond Print - Fed Monetizing - Government Bond Dealer banks as middleman playing shell game hiding paper by quickly moving from bonds to equities to derivatives (HFT connection). If this is not enough than you have ECB - Fed -Japan Central Bank shuffle. Simple. And then again back to the beginning (deficit). Circle closed.
I agree with this original comment. Many (including me) are confused about HFT. Just a heads up. in the "Hold Brothers $4 Million Manipulative Trading Case" thread, Mr. Bright has made an interesting seminar offer on page 11. Of course, I have no relationship to him at all. I just like to learn to get better and some of his past comments have been very good to help me think. I am still thinking about the comment of the VALUE ADDED by HFT to the markets.
Sorry, but this is entirely incoherent. QE purchases are done at a set time with the primary dealers, who solicit bids on behalf of bond traders. "Bond print" are auctions that are also done at a set time, using an auction protocol. Neither of which is done on a high-frequency basis. Both of these are done with the schedule published far ahead of time on the fed website. I have actually traded both of them (I used to trade bonds institutionally). Further, the vast majority of bond trading is still done over-the-counter or over request-for-quote systems (tradeweb, for example), which preclude of the use of HFT. The primary dealers themselves have little to do with the flow of money from bond to equity to bond; They merely do the bond trading - again, mostly over voice. What's the shell game? What's being hidden? None of these have any direct connection with HFT. You don't like QE. Fine. You don't like the deficit financing - fair enough. Neither of which have any direct effect on HFT.
The primary dealers are who? The biggest banks with trading desks in bonds, derivatives and equities. Yes the bond part of the game is gentlemen club. The question is where the liquidity in the markets and exponentially growing capitalization is coming from. Also who is buying the bond? Billions of new paper each month in the US alone. It does not add up with the output of the economy. Money is moving from bonds to equities and back and the volatility to induce this is created by the dealer banks with HFT. After all they have the inventory of unsold paper. Bond layering with mortgages and other exotic products was shot in 2008. Just watch the stock market and match with calendar of government bond auctions. You see the pattern.
so you're telling me that a institution, which essentially has unlimited money, aren't using algos to walk up X and down Y on the ladder at will?
Have you ever heard of quote stuffing ? There may be the appearance of always having "somebody to buy and sell", but the reality can be quite different. At least according to the SEC. http://online.wsj.com/article/SB10001424052748703882304575465990082237642.html