Treasury dealers foil HFT

The presence of these traders in bonds, however, lags behind their dominant role in the US equity market. One reason the US Treasury market has withstood the challenge of these computer traders, and their algorithms designed to spot small market moves and blips which are then quickly traded on to lock in profits, is that bond trading remains segmented.

Intent on maintaining their dominant market share and big profits, the big dealers have embraced technology and keep large institutional investors at arm’s length, away from direct access to the big two electronic trading platforms – ESpeed and Brokertec – which underpin the $6,900bn Treasury market.

This reduces the size of the potential “pool” in which the computer-driven traders can dabble. Large parts of the market are essentially walled off to direct trading by investors such as the high-frequency traders and available just to Treasury dealers