One of my friends passed on a Coolabah webinar, i haven't looked at the FI market for a long time and Coolabah in particular. These are my generic comments on this unusual operator.

thanks for that, fascinating webinar. As you may remember I started as a FI trader back in the 1980's so I have an idea about that market. having said that I haven't come across anything like what they say they to do.

the points that stood out to me are that CJ says they don't take liquidity, credit or duration risk, although some strategies have duration where they measure against that benchmark and there is some leverage in some of their funds. that doesn't explain what they do.

their t/o is phenomenal, even for FI which is higher than equities so massive trading. the question is what factor are they arbitraging, why is it there and will it persist? that's what I would want to know.  

the best i can come up with is that they are looking at a multitude of small mispricing and playing a reversion strategy. this is the sort of thing that MQG do/did? well in various markets. who are the losers? again the best I can do is that they would be much bigger insto's who are undertaking trades and have tails in their trades and are not that fussed if they finish the trade by selling /buying too cheaply/expensive. I've done it myself in equities when you have done 95% of the trade and you want it cleared out and are willing to take a haircut on price. to run these strategies successfully needs vigilance, is very management/time intensive and also requires market-sensitive info (what and who is the depth), which incidentally they did mention that Yi Ann does gather. to trade these markets you need big liquid markets which accords with what they say they are involved with. they did mention OTC markets as well, maybe that is their sweet spot. 

is this strategy sustainable going forward? i am surprised this anomaly persists, not because it is not an opportunity, moving large insto's portfolios gives off a lot of friction that would give opportunities to smaller nimble operators, like Coolabah, but i am surprised that others haven't closed the arb. however, we know that many principal deals have closed around the world, due to running poor risks, so maybe that explains the opportunity. in equities, we have seen principal trading operations move to HF and boutiques.

the arbitrage is open to them up to a certain size when they then get too large to squeeze into the trades, don't know when that is but FI markets are huge. CJ says $30-50B they are $10B now

That is all i have