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Finance: What is program trading? 14 Views
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What is program trading? Program trading refers to the use of computer algorithms to place and execute large volume, multiple buy and sell orders of a basket of securities simultaneously, predicated on predetermined, calculated parameters. The NYSE categorizes a basket of a minimum 15 different securities and $1 million valuation as program trading when linked to a systematic strategy.
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Transcript
- 00:00
Finance a la shmoop what is program trading? okay well watch two episodes of
- 00:08
Big Bang Theory if you first watch one episode of Keeping Up with the [Man and woman watching TV]
- 00:12
Kardashians deal alright no different kind of program trading, program trades
- 00:17
in a Wall Street sense are run by a computer program, hence the catchy name
- 00:22
and it's also called the black box like a program kicks out that if the S&P 500
Full Transcript
- 00:27
is down 0.3 percent in an hour and the US dollar has risen relative to the
- 00:31
pound and goog is outperforming the tech index and the moon is in the seventh
- 00:36
house and Jupiter is aligned with Mars then short a million shares of GE like
- 00:42
that would be something that the box would tell you or something like that
- 00:45
and there are a ton of weird mathy things behind the rationale for each of [Math formulas appear]
- 00:50
these trades some of it makes sense to normal people but most of it needs three
- 00:55
PhDs in math and physics and other stuff to translate rationally
- 00:59
well the dangerous thing here about program trades is that usually there is
- 01:03
no human involved when they execute a trade that is it's just computers
- 01:07
talking to other computers but thankfully computers never have glitches [Computer chip blowing off steam]
- 01:13
right they never have mistakes and things generally always run smoothly
- 01:17
when computers are involved right well this is a really smart way to manage
- 01:21
your retirement money just give it all to a black box and assume the guys who
- 01:25
wrote the algorithm knew what they were doing or maybe not [Hacker using a PC]
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