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program trading |
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program trading, a form of securities trading, also known as index arbitrage. Program traders exploit the price discrepancies between indexes of stocks and futures contracts by using sophisticated computer models to hedge positions. Program trading (also called computer-assisted trading) arose with the advent of computer and telecommunication technologies, whereby trade in different markets could be monitored simultaneously and manipulated accordingly. Because the size of the transactions often caused massive jolts in the stock market, many concluded that program trading was largely responsible for the 500-point drop in the Dow Jones Industrial Average Dow Jones Average, indicators used to measure and report value changes in representative stock groupings on the New York stock exchange . There are four different averages—industrial stocks, transportation stocks, utility stocks, and a composite average of all ..... Click the link for more information. on Oct. 19, 1987. During the economic recession that followed, the New York Stock Exchange put new restrictions on computerized trading, and many companies refused to do business with any brokerage house that engaged in program trading. With the unprececented growth of the stock market in the later 1990s, program trading saw a resurgence in some trading houses. |
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Some of the losses - and part of the volatility that helped the Dow plunge 145 points early in the day - were attributed to heavy program trading and ``double witching,'' the expiration of some options on stocks and stock indexes. Program trading was also ranked of high concern by 72 percent of the respondents, followed by leveraged buyouts 69 percent), junk boards (63 percetn), and volatility of the securities markets (62 percent). For institutional investors, SIG offers brokerage in listed and NASDAQ stocks, Exchange Traded Funds (ETFs), options, program trading and American Depositary Receipts (ADRs), as well as differentiated equity research. |
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program trading
