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Program trading is the purchase or sale of a basket, or group, of 15 or more stocks with the combined value of $1 million or more.
In some cases, programmed trades are triggered automatically when prices hit predetermined levels.
In other cases, institutional investors, arbitrageurs, and other large investors use program trading to take advantage of the spread between a basket of stocks replicating an index and a futures contract on the same index.
Large-scale program trading can cause abrupt price changes in a stock or group of stocks and may even have a dramatic effect on the overall market. The New York Stock Exchange (NYSE) and other exchanges have instituted a series of circuit breakers, which halt trading for a period of time when prices fall by specific percentages in a single day, to help prevent such disruption.