Program trades

Program trades

Orders requiring the execution of trades in a large number of different stocks at as near the same time as possible. Also called basket trades. Related: Block trade

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.
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1 The NYSE calculates program trading as the sum of shares bought, sold and sold short in program trades.
-Program Trading Averaged 25.8 Percent of NYSE Volume during May 13-17
The volume of stocks exchanged in orders labeled program trades typically averages 10 percent of total volume.
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.
Does program trading cause stock prices to overreact?
Program trades are usually undertaken blind; that is, the broker does not know the exact composition of the portfolio and must use his judgement in deciding whether or not a particular portfolio should be acquired.
This is partly because firms involved in program trading do not readily publicize the fact, and also because such figures as do exist relate not only to true program trades but also to index arbitrage and portfolio insurance.
The debate over computer-assisted trading: who is right?

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