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 AverageDow 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 three.
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 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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In fact, he argues that program traders, who buy and sell baskets of stocks against stock futures, could not possibly have been doing much trading on that dreadful October 19 because nobody knew what the prices were.
In addition to allowing open access to both buy-side and sell-side firms, the BIDS ATS is open to algorithms, hedge funds and program traders.
The BIDS ATS is open to sell-side firms and their sponsored buy-side firms, as well as algorithms, hedge funds and program traders.
In addition to allowing open access to both sell-side firms and their sponsored buy-side firms, the BIDS ATS is open to algorithms, hedge funds and program traders.

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