NEW YORK (CNNMoney) — In the new age of high speed trading, U.S. Treasuries could become the next flash crash victim.
High-frequency trading now accounts for roughly 40% to 50% of the daily volume in Treasuries, compared to a “negligible amount” just five years ago, according to research firm Tabb Group.
The enormous size of the Treasuries market makes it appealing to firms that make money from huge volumes of trades.
As with stocks, the fear is that flash crashes could cause sharp plunges in Treasury prices. That would lead to soaring yields, from all-time lows below 1.5%, to as high as 4%.
Some of the biggest players in high-frequency trading, DRW Holdings, Sun Trading, Virtu Financial, Hudson River Trading, Jump Trading and GSA Capital Partners, have all been expanding their reach to Treasuries, according to numerous trading sources.