HFT firms can only access on-the-run trading currently. That doesn't mean the bank is responsible for all the liquidity in off-the-runs. It's just highly inefficient that intermediation has to occur via the swapbox, which isn't accessible to electronic market makers. There are plenty of relative value hedge funds that would take the other side of buy-side flows, if they had access to a market where they could show their trading intentions anonymously.
If Direct Match has enough success, what would stop ICAP/BrokerTec/eSpeed from allowing HFT firms to trade off-the-money and snatching back up the market?
