The equity and FX markets were the first to be overrun by computerized trading strategies now the $12.7t Treasury market is feeling the impact.
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The New Bond Market: Algorithms Trump Humans
Anthony Perrotta, partner at researcher Tabb Group, estimates superfast, nonbank trading firms account for 60% of activity in the most active corners of electronic Treasury trading, up from 45% in 2012. “Technology has introduced a whole new set of market participants into Treasurys and this makes the market more prone to move in unexpected ways,” said Amar Reganti, strategist at Boston-based asset manager Grantham Mayo Van Otterloo & Co. and former deputy director in the office of debt management at the U.S. Treasury Department. Algorithmic trading firms say they should be evaluated on the basis of individual trading strategies or behaviors that regulators want to stamp out, not how they are organized. They say automated trading is conducted by an array of institutions, including large securities-dealing banks that have invested in such technology to compete.
