Liffe - Euribor - Total Volume Collapse

[d08]

Quote from THE-BEAKER:

my arguement all along was and is that the open out cry floor based system ended to make the market fairer, more liquid and a level playing field for all participants.

what we have now is the opposite of that.

Floor trading was inefficient and the furthest thing from fair.
Electronic trading with regulations would be the best platform, however the regulation is lacking right now.
Implementing proper regulation to stop the fake volume is crucial for the markets. One problem is that the brightest minds go work for HFT firms and not the SEC, they've even admitted that.
Regulation is always lagging behind, it's the way of the world.

 

[AK100]

Quote from Grandluxe:

so which other mkt have people jumped to

I don't know exactly but plenty of movement in -

Gold/Silver
Many o the FX crosses
Always action in the European stock indexes

However, if you're a short term spreader then yes, you've probably got a real problem right now.

Perhaps the golden age of futures has ended due to overuse of computers?

 

[AK100]

Shocking drop in those volumes.

The execs at LIFFE and EUREX can't say they weren't warned what would happen when they started to get down on their knees and blow all the algo houses looking for short term volume gains.

Well guys, you got your big volume gains (in the short term), no doubt high fives all around in the office but your ship is now leaning to port so badly that it's probably impossible to right again. The only way to save it would be for the economy to collapse under it's own debt in 2012 hence major volume/volatility increases.

Sadly, that doesn't look like it's going to happen for a few more years yet.

 

[newtricks]

Quote from AK100:

Perhaps the golden age of futures has ended due to overuse of computers?

Sadly it very much looks that way.

Had the HFT/ALGO mob been regulated quicker then I think it stood a chance but with what's going on here day in day out it's not really surprising that this is the net result.

It's been handled so badly that there was only ever one outcome.

Clearing firms must be concerned with all the overhead they must be carrying in pricey staff/big city rents and IT expenses.

 

[newtricks]

Quote from AK100:

Shocking drop in those volumes.

The execs at LIFFE and EUREX can't say they weren't warned what would happen when they started to get down on their knees and blow all the algo houses looking for short term volume gains.

Well guys, you got your big volume gains (in the short term), no doubt high fives all around in the office but your ship is now leaning to port so badly that it's probably impossible to right again. The only way to save it would be for the economy to collapse under it's own debt in 2012 hence major volume/volatility increases.

Sadly, that doesn't look like it's going to happen for a few more years yet.

All true

I remember calling up at the exchanges when algos were called "price injection models" and these dickheads were all over it.

You just knew they were happy that the human trading community were unhappy and thought that by being bid/offered in 5k they thought the "scientists" were the new breed.

What a spectacular cock up.

 

[bearcats1980]

Quote from THE-BEAKER:

no where to jump to.

every trader is in their comfort zone in a market they feel they have some sort of understanding of and ' edge '.

its the same problem in all products.

hft has no boundary.

it exploits, takes profit, kills that local market and moves on.

in fixed income its so efficient they have no new counterparties to trade with and have taken out all money and participants.

hence the volume collapsing.

Beaker- I've read a few of your posts on here. Your perspective is interesting, although extreme. Elaborate on "kills that local market and moves on". Allocation algos have been prevalent in Eurodollars for instance, for almost 10 years now. Nothing has changed in terms of edge there outside of the fundamental lack of paper due to there being less natural hedgers thanks to the interest rate environment. These types of algos have never made any threatening amount of money or significantly taken away opportunity from other locals. Volume is a function of what is fundamentally happening in the economy and with fed and ecb and has little to do with"HFT" algos exploiting these curve markets imo.

You probably disagree, so elaborate. Give me an example of an algorithm that you think has exploited these markets to the point where there is significantly less opportunity for manual discretionary intraday trading in these markets.

PS- its erroneous of you imo to extrapolate 2012 ytd volume like that, as, like I posted above, volume is a function of economic environemtn, euro crisis and events that cannot be foreseen and is not equally distributed throughout the year.

Give a few examples of HFT "exploiting...taking profits...killing the local market, and moving on".

 

[THE-BEAKER]

Quote from bearcats1980:

Beaker- I've read a few of your posts on here. Your perspective is interesting, although extreme. Elaborate on "kills that local market and moves on". Allocation algos have been prevalent in Eurodollars for instance, for almost 10 years now. Nothing has changed in terms of edge there outside of the fundamental lack of paper due to there being less natural hedgers thanks to the interest rate environment. These types of algos have never made any threatening amount of money or significantly taken away opportunity from other locals. Volume is a function of what is fundamentally happening in the economy and with fed and ecb and has little to do with"HFT" algos exploiting these curve markets imo.

You probably disagree, so elaborate. Give me an example of an algorithm that you think has exploited these markets to the point where there is significantly less opportunity for manual discretionary intraday trading in these markets.

PS- its erroneous of you imo to extrapolate 2012 ytd volume like that, as, like I posted above, volume is a function of economic environemtn, euro crisis and events that cannot be foreseen and is not equally distributed throughout the year.

Give a few examples of HFT "exploiting...taking profits...killing the local market, and moving on".

hft and algo's in general have taken credit for the explosion of volume from 2003 to2009.

therefore as they are the majority players they have to take credit for the decrease in volume.

my simple analysis of the siutation has been the same all along.

hft (the like of rsj and getco ) have been a major success in the market.

but if your that good and earn tens of millions in profits which they do then there comes a point when you are the majority player that no one will play against you.

by their own success they create no new volume as less and less people turn upto play because they keep losing against a superior opponent.

there is a lot going on in this market and the volumes are not reflective of this.

conclusion - hft does not increase volume.

it decreases it.

 

[bearcats1980]

I see your point, I guess I just dont see the market the same way. I think a given market moves one way or another due to what "paper" is doing. These days, "paper" is for the most part large speculative accounts ie Goldman, etc. This is where at least half of the volume comes from, and the other half imo is locals and the HFT algos (essentially more technologically advanced locals).

I'm not saying my perspective is necessarily correct, but this is the way I interpret it. If i'm interpreting your posts correctly, you are saying that of the 100k Z4 Eurodollar futures contracts that traded from 9865.0 to 9872.5 in todays session, the majority of those contracts were HFT firms such as Getco and RSJ "exploting" locals and dominating other speculators.

Whereas my opinion is that half the volume was large speculators and paper adjusting positions and hedging options in anticipation of the 5yr note auction, and then in reaction to the results of that auction, combined with a fairly significant bond level that was traded around. The other half was locals like me either trading in the same manner or filling paper for small edge on big size.

How many non-automated locals do you think traded at least 500 GEZ4 contracts today? I'd say upwards of 100. That's 50k contracts. Now how many different automated parties (HFT) traded at least 500 GEZ4? At least 40? theres another 20k contracts and its very likely that the remaining 30k was large speculative (paper) orders initiating, exiting, or adjusting longer term positions.

I guess I'm just having a hard time seeing how these bullying HFT algos you speak of are accounting for so much volume.

 

[THE-BEAKER]

Quote from bearcats1980:

I see your point, I guess I just dont see the market the same way. I think a given market moves one way or another due to what "paper" is doing. These days, "paper" is for the most part large speculative accounts ie Goldman, etc. This is where at least half of the volume comes from, and the other half imo is locals and the HFT algos (essentially more technologically advanced locals).

I'm not saying my perspective is necessarily correct, but this is the way I interpret it. If i'm interpreting your posts correctly, you are saying that of the 100k Z4 Eurodollar futures contracts that traded from 9865.0 to 9872.5 in todays session, the majority of those contracts were HFT firms such as Getco and RSJ "exploting" locals and dominating other speculators.

Whereas my opinion is that half the volume was large speculators and paper adjusting positions and hedging options in anticipation of the 5yr note auction, and then in reaction to the results of that auction, combined with a fairly significant bond level that was traded around. The other half was locals like me either trading in the same manner or filling paper for small edge on big size.

How many non-automated locals do you think traded at least 500 GEZ4 contracts today? I'd say upwards of 100. That's 50k contracts. Now how many different automated parties (HFT) traded at least 500 GEZ4? At least 40? theres another 20k contracts and its very likely that the remaining 30k was large speculative (paper) orders initiating, exiting, or adjusting longer term positions.

I guess I'm just having a hard time seeing how these bullying HFT algos you speak of are accounting for so much volume.

let rsj figures speak for themselves:

http://www.rsj.com/cz/

i rest my case

 

[bearcats1980]

Quote from THE-BEAKER:

let rsj figures speak for themselves:

http://www.rsj.com/cz/

i rest my case

You appear to be grossly overestimating these parties' activity and influence on these markets.

So far this year (Jan, Feb, Mar 2012), Cme group has traded 490 Million contracts. Even assuming RSJ's quarterly CME volume DOUBLED from 2011 to 2012 (which would have them trading 60 Million contracts this quarter), their volume would still be 1/8 of the total chicago volume. Granted, this is a relatively huge percentage and you could say that they are amongst the largest single contributors of CME volume, but remember they are still 1/8 AT THE MOST (remember, I assumed they doubled their 2011 volume for the sake of this example). Now, let's say big bad GETCO has the same volume. Together, these two groups would account for 1/4 of the volume (believe me, they dont).

These groups are large technologically advanced locals. They are making markets and exploiting the edge that speculators with a larger timeframe and natural hedgers give up. They are just way more efficient than a local doing it purely by hand. They're not trading with themselves or other locals, theyre most likely COMPETING against other locals for the good stuff and they are getting more and more of it. For every hand-trading local that leaves the market, RSJ's (or some other party's) volume increases. Paper gets filled regardless. Large orders get filled regardless. Here is the link for CME volume...

http://www.cmegroup.com/trading/interest-rates/stir/eurodollar_quotes_volume_voi.html