|
Quote: |
|
 |
|
|
I think 'program' trading, in a narrow sense, refers to those arbitrage activities where stock bought/futures sold or stocks sold/futures bought, whereas there is also a broader sense in which the word is used to refer to other types of automated activity. I think the best word to encompass all the types of automated activity executed by computers/robots is algorithmic trading. Wikipedia, while not a definitive source, has a good selection of articles and links about algorithmic trading. |
|
|
|
|
Hey Mr Ed, sorry about the terminolgy. I was pretty much refering to algorithmic trading when I mentioned program trading, the broader sense of the word. Maybe the arbitrage side though what we might be actually able to see with PREM. I'm not sure if you caught these statistics, it was in some link I found from what you posted. This was sopposed to be an average day the way the trading breaks down:
NYSE Closing Summary
Trade Date 8/16/2007
NYSE Trades ....8, 908, 020
NYSE Volume....2, 989, 836, 240
NYSE Dollar Volume ....115, 188, 118, 914
Retail Buy Trades ....152, 848
Retail Sell Trades ....204, 524
Total Retail Trades ....357, 372
Retail Buy Volume....53, 008, 213
Retail Sell Volume.... 76, 575, 492
Total Retail Volume....129, 583, 705
Program Trading
Index Arbitrage Program Trades ....576, 924
Non-Index Arbitrage Program Trades ....6, 231, 010
Total Program Trades....6, 807, 934
Index Arbitrage Program Volume ....111, 238, 364
Non-Index Arbitrage Program Volume ....1, 534, 370, 009
Total Program Volume....1, 645, 608, 37
.
Program trading accounted for 55% of total NYSE volume.
Retail trading accounted for 4% of total NYSE volume.
Program trading accounted for 76% of NYSE trades.
Retail trading accounted for 4% of NYSE trades.
The problem came though from the index arb sites levels. I plotted lines for what they gave as the threshold on the PREM for when there was a probability greater than zero of the arbitrage programs coming in to get cash back in line with the futures. The levels were not violated all day so indexarb was basically saying there should have been zero probability of arbitrage all day when those stats say that its normally half the volume. I'll try this again all next week, maybe I just messed something up yesterday.
What I mentioned about the breakout was certainly a big leap/speculation. The thing is though I have to question that if the programs are doing that much volume, that when you see price jump ultra fast that its the programs and not humans all getting in at the same exact time. If some of programs are so directly piped into the system they can actually execute orders in 10 miliseconds they would seem to me to be the obvious culprit. I'm not sure how useful that would be if true but it could be an interesting filter to stay out of bad trades if that indexarb site levels worked. If you knew there was a 50% chance of the arbitrage programs going off it wouldn't make much sense to step in front of that on the other side.
Check out that janowski.pdf if you have not, that presentation sounds incredible. Here is his version of the terminator script
"
How is it Possible to Compete with
the Speed of Automated Systems?
• The answer to this question is to NOT
compete with the black-box systems
(at least at their own game)
• The key is to eliminate the “lay-ups”
that traders give to automated systems
• Traders should conduct trades at
prices that are somewhere between
the desired buy & sell prices of such
systems (i.e. “fair value” trades)"