Nanex Research

Nanex ~ 18-Jul-2013 ~ Philly Fed And The New Treasury Game

On July 18, 2013, the scheduled release of the Philadelphia Fed Survey came about 1/4 second late. Compare this with the 1/2 second late show on May 16, 2013.

Trading was particularly heaving in treasury futures. We also noticed significant short term (millisecond) activity in the new NOB futures which was created to provide an easy way to trade the spread between 10-Year and 30-Year Treasury futures. However, add High Frequency Trading (HFT) into the mix, and what you end up with is new incentive for dislocating treasury prices. NOB futures first started trading on June 17, 2013 and the creators of this product probably didn't realize how quickly HFT would figure out a way to exacerbate and profit from latency differences in updating prices for Ten Year and T-Bond futures.

1. September 2013 Ten Year T-Note vs T-Bond (NOB) Futures.
Futures contract based on the spread between Ten Year (Chart 2) and T-Bond (chart 3) futures. Futures. What could possibly go wrong when there is now an incentive to manufacture instability between the two other futures contracts? Note the very active trading during this news event:  was most of this activity from temporary price dislocation due to price update latency differences for the Ten Year and T-Bond Futures?

2. September 2013 Ten Year T-Note (ZN) Futures.

3. September 2013 T-Bond (ZB) Futures.

4. September 2013 eMini (ES) Depth of Book.

5. September 2013 eMini (ES) Futures.

6. August 2013 Gold (GC) Futures.

7. September 2013 Five Year T-Note (ZF) Futures.

8. September Two Year T-Note (ZT) Futures.

Nanex Research