Speed Traders
Treasury is also focused on high-speed electronic trading firms, based on its questions. They want to hear about the implications of requiring automated trading firms to register with regulators.
The government’s July report found that both banks and high-frequency traders contributed to the dramatic Treasury price swings. That report had detailed data from platforms where dealers and electronic market-makers trade, such as ICAP Plc’s BrokerTec and Nasdaq Inc.’s eSpeed. It also included data on Treasury futures transactions on CME Group Inc.’s platform, which is regulated by the CFTC.
Officials asked for comments on whether central venues where traditional Wall Street dealers and high-speed firms trade should all introduce risk-management measures like trading halts or monitor trading activity.
Electronic trading was a new concept for most traders when the government last looked at the Treasury market’s structure in 1998. Anthony Perrotta, a partner at financial-services research firm Tabb Group LLC, estimated that 60 percent of trading on central platforms came from those firms last year.
“The market’s structure has absolutely changed over the last five to six years, and it’s picked up rapidly in the last two,” he said in an interview. “It’s more fragile,” but because “it has the appearance of wide, deep liquidity, it’s been somewhat overlooked.”