'Spoofing' isn't manipulating gold market alone but Treasuries as well


Light-Speed Treasury Trading Governed by Rules Dating to 1998

By Matthew Leising
Bloomberg News
Monday, December 8, 2014

NEW YORK -- The last time regulators took a hard look at how Wall Street trades Treasuries, a little company called Google Inc. was just starting out.

That was 1998, and the technological leaps since then -- including ones that are now transforming bond markets -- have left government overseers in the dust. In particular, executives from three of the biggest market-making firms say an electronic bait-and-switch tactic known as spoofing, which is already the focus of a manipulation allegation at a futures exchange, needs to be investigated in cash Treasuries.

Rules first enacted in 1986 that have gone virtually untouched for a decade and a half are allowing computerized firms to outmaneuver less-savvy rivals and, some executives assert, manipulate prices. They say a lack of cohesive regulation and technology to monitor high-frequency traders is making the world’s biggest government bond market more dangerous for everyone.

"The lack of transparency to the regulators, let alone the public, is the biggest concern," said Kevin McPartland, head of market structure and research at Greenwich Associates in Stamford, Connecticut. "It feels hypocritical that the government debt market is the one not being looked at."

The three market-making executives, who asked not to be named because they aren't authorized to speak publicly, say they have no idea where to take allegations of spoofing in cash Treasuries. No single regulator in that $12.3 trillion market has the authority or expertise to assess evidence of illicit practices such as those in an arbitration case at one of the world's biggest exchange operators, Chicago-based CME Group Inc., the market makers said. ...

... For the remainder of the report:



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