As I hear from CNNfn and CNBC, the last few days of rally was largely due to program trading. Who are the program traders, how do they synchronize buy or sell prices, how many program traders can influence the market, and how many of them are in the wall street? If they are few in number, do they meet before the next trading day to plan or conspire to fuel or tank the market? Any program trader here??
Program Trading
- Thread starter Spark
- Start date
large institutional buying/selling of huge baskets of stocks based on computer-generated buy/sell signals. When the market as a whole hits a certain high or low point based on the T/A of that particular fund's analysts, the programs are 'tripped off".
Bear in mind that mutual fund managers are bound by many rules, one of which is that they have to have a large number of positions (they are bound to be very diverse) and they are constantly trying to time the markets ebb/flow to generate positive returns in order to make up for losses that they sustain on many positions.
I seriously doubt that they collude with each other in order to monopolize pricing -each firm like Janus, Vanguard, Solomon, etc. each has their own plan and they compete with each other.
Never forget that institutional buying/selling is what moves the markets significantly.
Small traders like us barely make a ripple.
Paul
Bear in mind that mutual fund managers are bound by many rules, one of which is that they have to have a large number of positions (they are bound to be very diverse) and they are constantly trying to time the markets ebb/flow to generate positive returns in order to make up for losses that they sustain on many positions.
I seriously doubt that they collude with each other in order to monopolize pricing -each firm like Janus, Vanguard, Solomon, etc. each has their own plan and they compete with each other.
Never forget that institutional buying/selling is what moves the markets significantly.
Small traders like us barely make a ripple.
Paul
The program traders are mostly former SEALs and ATF agents from the time of the Nixon administration. They are definitely involved in a conspiracy. While we are sleeping they are plotting. While we are looking towards Wall Street, they are hiding and trading from their high mountain retreats somewhere just east of Salt Lake City. They communicate only to each other and their designated traders in Chicago at the Merq by super encrypted satellite telephones. They synchronize their trades using the computer in Cheyenne Mountain (you may have seen it in the movie "War Games" with Matthew Broderick). Since the end of the cold war, that has been the main use of that crazy thing. I am a former program trader. I am in the witness protection program now. They have given me a sex change operation (which is ok.....I was always a lesbian trapped in a mans body before). I wish I could tell you more, but if I did, I would have to make certain you were liquidated with extreme prejudice before tomorrow morning's open.
Hope this helps.
Have a nice day!!!
PS: Don't believe what Slapshot just said. He is really G. Gordon Liddy who most people don't realize is really Abby Hoffman, who's death was faked to throw the public off track.
There's NO conspiracy on Wall St. Geez. Can people just stop believing there's this grand conspiracy and that only a few are in it to screw everyone?
No such thing.
Program trading is nothing more than a way to buy,sell,short a basket of stocks(15 or more) worth at least $1M. That's the definition. Program trading is sometimes associated with index arbitrage, but it's NOT a strategy. It's merely an execution technology.
Rather than having traders sitting there clicking and bidding and offering to get shares(like what daytraders do on L2 via ECNs,etc), large institutions usually use computers to trade an entire portfolio. When I was working at a quant fund, even though we managed only $1Billion, we only had 2 traders. The rest of us are portfolio managers/quants who build the models and send it our traders who sent it to a computer program that goes out and "rebalance" or "trade" a few hundred million dollars worth at a time.
Now, a few hundred millions dollars by itself is not that big. But that's just one fund. Now imagine 20-30 guys doing program trading and you'll see why the markets have such wide swings lately.
The main users of program trading are:
1) quant funds
2) proprietary trading desk on Wall St
3) Index arbitrage guys
4) even the lowly mutual fund guys are doing it now
Some people blamed program trading and portfolio insurance for the 1987 crash, which I think is circumstantial. The crash happened for other fundamental reasons. Program trading might have accelerated the process a little. hehe.
Now, I think in the long run, execution traders are a DYING breed.
I mean execution skills are somewhat useful but in the long run, there's nothing that a computer can't do better, faster, and cheaper. It's just the way things work.
Now, that I'm at a prop trading firm, I finally realize that when I was a quant I didn't have to care about the excution part of the strategy(because we had other people do that job for us). And it's not as easy as it looks, because of "emotional" aspect of intraday trading. doh! I'm still working on that. Hopefully should master it soon.
In actuality, I think it would be nice if prop firms out there offer such a tool. Because to me, it would totally increase profits by a 100-fold if you can execute your strategy across hundreds of stocks. You CAN'T possibly humanly do that if you point-and-click or clacking on your keyboard.
Anyhow, a final note. Program trading is here to stay. And will play a greater role every day. It's just more efficient, faster, cheaper to have powerful computers execute your trades then hire a bunch of flesh and blood guys staring at monitors and getting shares for you. Technology will always relegate the need for basic human skills more and more and only the truly value-added part of the chain will command a premium...
Just like the Industrial Revolution made the need for physical strength less valuable since machines can lift, push, pull, drag,etc. more weight than thousands of men...
Hope that explains and answers your questions.
good trading.
99
NYSE usually publishes weekly the Program Trading(PT) Volume as a percentage of the Total NYSE volume and the top 15 Most Active progrram trading firms.
Who are they? The latest NYSE report reveals that the largest players are:
1. MORGAN STANLEY...
3. RBC DOMINION...
5. LEHMAN BROTHERS...
7.BEAR STEARNS...
9. INTERACTIVE BROKERS...
11. SALOMON SMITH BARNEY...etc.
Usually PT volume is around 30-37% of the total NYSE volume.
Who are they? The latest NYSE report reveals that the largest players are:
1. MORGAN STANLEY...
3. RBC DOMINION...
5. LEHMAN BROTHERS...
7.BEAR STEARNS...
9. INTERACTIVE BROKERS...
11. SALOMON SMITH BARNEY...etc.
Usually PT volume is around 30-37% of the total NYSE volume.
