Editing Program trading (section)

{{Short description|Type of trading in securities}}
{{Use American English|date=May 2021}}
{{Use mdy dates|date=May 2021}}
[[File:Benefits-and-Drawbacks-of-Algorithmic-Trading.png|thumb|260x260px|Pros and cons on '''Algorithmic Trading''']]
'''Program trading''' is a type of trading in [[Security (finance)|securities]], usually consisting of baskets of fifteen stocks or more that are executed by a computer program simultaneously based on predetermined conditions.<ref>{{cite web |url=https://www.nyse.com/press/1251367637915.html |title=NYSE, New York Stock Exchange > About Us > News & Events > News Releases > Press Release 08-27-2009 |website=www.nyse.com |url-status=dead |archive-url=https://web.archive.org/web/20110716001007/http://www.nyse.com/press/1251367637915.html |archive-date=2011-07-16}} </ref> Program trading is often used by hedge funds and other institutional investors pursuing index arbitrage or other arbitrage strategies.<ref>Lemke and Lins, ''Soft Dollars and Other Trading Activities'', §2:35 (Thomson West, 2013-2104 ed.).</ref> There are essentially two reasons to use program trading, either because of the desire to trade many stocks simultaneously (for example, when a [[mutual fund]] receives an influx of money it will use that money to increase its holdings in the multiple stocks which the fund is based on), or alternatively to [[arbitrage]] temporary price discrepancies between related financial instruments, such as between an index and its constituent parts.<ref>{{cite encyclopedia |last1=Furbush |first1=Dean |editor= David R. Henderson |editor-link= David R. Henderson |encyclopedia=[[Concise Encyclopedia of Economics]] |title=Program Trading |url=http://www.econlib.org/library/Enc1/ProgramTrading.html |year=2002 |edition= 1st |publisher=[[Library of Economics and Liberty]] }} {{OCLC|317650570|50016270|163149563}}</ref>

According to the [[New York Stock Exchange]], in 2006 program trading accounts for about 30% and as high as 46.4% of the trading volume on that exchange every day.<ref>{{cite web |url=https://www.nyse.com/pdfs/Weekly_History_with_New_Method2.pdf |title=NYSE Weekly Historic Stats 2004–2006 using new method |publisher=NYSE}}</ref> [[Barron's Magazine|Barrons]] breaks down its weekly figures for program trading between index arbitrage and other types of program trading. As of July 2012, program trading made up about 25% of the volume on the NYSE; index arbitrage made up less than 1%.<ref name="online.barrons">{{Cite web|url=http://online.barrons.com/public/page/9_0210-nysepgtd.html|title = Market Data Center &#124; Barron's}}</ref>