program trading


Also found in: Dictionary, Thesaurus, Financial, Acronyms, Wikipedia.

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.
..... 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.
Mentioned in ?
References in periodicals archive ?
This paper intends to apply stochastic dominance method to test the efficiency of program trading rules.
Much of the literature on program trading considers its effect on stock price volatility.
Very few of the survey respondents considered themselves "very familiar" with program trading or index arbitrage.
Yet, anyone who is writing about today's stock market should know what program trading is.
Haresh (Harry) Rana: With 20 years of trading experience, Rana will head the Program Trading desk at Wells Fargo Securities.
Program trading involves the purchase or sale of equities through a transaction that involves a portfolio of stocks rather than a series of transactions effected on a stock-by-stock basis.
general media indicate that some journalists believe that program trading denotes any computer system which appears to carry out an actual trading decision on behalf of the trader.
With nearly 15 years of experience, Aronstein joins Piper Jaffray from Bank of America where he was previously a principal in electronic trading services and focused on growing the program trading business with North American and European clients.
If the Dow moves more than 50 points from the previous day's close, computer-driven program trading is restricted.
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.
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.
The stock market plunged Wednesday in a frenzied session marked by heavy program trading.

Full browser ?