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InvestHub.com's
Finance Dictionary and Glossary of Investment Terms

Program trading  

Definition 1.

Trades based on signals from computer programs, usually entered directly from the trader's computer in to the market's computer system and executed automatically. Applies to derivative products. A process of electronic execution of trading of a basket of stocks simultaneously, for index arbitrage, portfolio restructuring, or outright buy/sell interests. See: super dot.
 

Definition 2.

Computer-driven, automatically-executed securities trades, usually in large volumes of a set (basket) of 15 or more stocks.
 

Definition 3.

Computerized trading undertaken by large institutions to exploit differences in price between expiring stock index futures and the underlying stock when both ought to be equal. The resulting arbitrage play produces essentially riskless profit. Program trading has been criticized for creating market turmoil, in effect producing risk-free profits for practitioners while increasing volatility for everyone else. But advocates of program trading say it makes a more efficient market by eliminating price differences between two items that are essentially the same.
 

Definition 4.

Computerized trading used primarily by institutional investors, typically for large volume trades. Orders from the trader's computer are entered directly into the market's computer system and executed automatically.
 
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