Program Trade


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Program Trade

A large trade executed automatically by a computer on behalf of institutional investors. Program trades are usually open orders in which the computer is programmed to wait until a certain price prevails before buying or selling a large quantity of securities. Because of the large number involved, program trading may lead to increased market volatility; because of this, program trading has been blamed for the 1987 Stock Market Crash, selling automatically as prices were reached, making the problem worse. Exchanges now limit the times when program trades may occur to prevent a recurrence. Program trading is also called basket trading. See also: Algorithmic trading.
References in periodicals archive ?
I investigate whether program trades increase the odds of price reversions.
Harris, Sofianos, and Shapiro (I 990) and Neal (1991) investigate intraday program trading, finding that responses to program trades are similar to those found for block trades.
Program trades are presently classified as buys, sells, and short sales.
However, neither ought to be described as a program trade.
Under what circumstances would a program trade be appropriate?
Algorithmic trading will replace a number of the manually-worked orders, orders sent to the cash desks of institutional brokers, and a number of trades currently pushed through program trades.
Nestle's Level One depositary receipt program trades over the counter (OTC), with information accessible through the Pink Sheets.

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