Algorithm trading (algorithmic trading, algo-trading, and robo-trading; algorithm = a precise rule or set of rules specifying how to solve some problem)
Program trading on the stock exchange, whereby – computers controlled according to financial mathematical models – continuously monitor prices automatically, – if necessary, automatically initiate buy or sell orders and – forward the orders electronically to the stock exchange (the use of computer programs for entering trading orders with the computer algorithm deciding on factors of the order such as the timing, price, or quantity of the order, or in many cases initiating the order without human intervention). – Because this self-controlling process can inevitably lead to sharp price jumps (upward spurts), the New York Stock Exchange introduced a restriction (collar) for computer-controlled trading: this form of trading is suspended if there are price changes of more than two percent on a trading day. As a result, computerized trading bypassed the exchange and moved to alternative marketplaces. In October 2007, the New York Stock Exchange therefore lifted the trading restrictions in question. – The Federal Financial Supervisory Authority published in December 2013 a fact sheet with supervisory requirements for algorithm trading, which incidentally includes high-frequency trading, – In modified meaning and in relation to banks and insurance companies the use of installed programs for decision-making; said in particular in large banks in connection with the One-BankDelivery and the Centers of Excellence. Each employee is to be put by appropriate assistance of the information technology into the position to process business procedures of all (as a rule today even in the individual areas again highly specialized) individual ranges independently. Today, all programs and data are usually stored on a central server in a cost-saving manner and are then available within the entire branch network of the bank or insurance company, if required, from a terminal via a protected intranet. – See Advanced Execution Services, Brady Commission, foreign exchange trading, computerized, high-frequency trading, Louvre chord, quote-stuffing tactics, scoring, up-tick rule.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
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