the biggest one-day point decline, 998.5 points, on an intraday basis in Dow Jones Industrial Average history. Where securities are traded on more than one exchange, arbitrage occurs by simultaneously buying in one and selling on the other. 16 Strategy implementation edit Most of the algorithmic strategies are implemented using modern programming languages, although some still implement strategies designed in spreadsheets. These strategies are more easily implemented by computers, because machines can react more rapidly to temporary mispricing and examine prices from several markets simultaneously. All portfolio-allocation decisions are made by computerized quantitative models. Like market-making strategies, statistical arbitrage can be applied in all asset classes. 67 Low-latency traders depend on ultra-low latency networks. In theory the long-short nature of the strategy should make it work regardless of the stock market direction.
It was expected that this change would result in greater transparency, increased liquidity, lower impact costs for large orders, better audit trails and better use of hedging and arbitrage opportunities. Siemon's Case Study Automated Trading Desk, accessed July 4, 2007 "Future of computer trading".
If the market prices are sufficiently different from those implied in the model to cover transaction cost then four transactions can be made to guarantee a risk-free profit. The focus is that your strategy should not create havoc for the market or for them, which is the key concern for the exchange and not what your strategy does. Hendershott, Terrence, Charles. During most trading days these two will develop disparity in the pricing between the two of them. The Executive Programme in Algorithmic Trading (epat) course covers training modules like Statistics Econometrics, Financial Computing Technology, and Algorithmic Quantitative Trading. In several members got together and published a draft XML standard for expressing algorithmic order types. Retrieved May 9, 2010 a b "City trusts computers to keep up with the news". Such simultaneous execution, if perfect substitutes are involved, minimizes capital requirements, but in practice never creates a "self-financing" (free) position, as many sources incorrectly assume following the theory. Automated Trading Desk, which was bought by Citigroup in July 2007, has been an active market maker, accounting for about 6 of total volume on both nasdaq and the New York Stock Exchange. 89 In the.S., spending on computers and software in the financial industry increased.4 billion in 2005.