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Algorithmic trading is a method of executing orders using automated pre-programmed trading instructions accounting for variables such as time, price, and volume. [1] This type of trading attempts to leverage the speed and computational resources of computers relative to human traders.
It is used to create custom indicators for financial charts and also to create algorithmic trading strategies for the markets. External DLL's can be referenced using EasyLanguage which greatly extends its functionality. The language was originally intended to allow creation of custom trading strategies by traders without specialized computer ...
It was in the US, in the late 1990s, that the first instances of Smart Order Routers appeared: "Once alternative trading systems (ATSes) started to pop up in U.S. cash equities markets … with the introduction of the U.S. Securities and Exchange Commission’s (SEC’s) Regulation ATS and changes to its order handling rules, smart order routing (SOR) has been a fact of life for global agency ...
To tackle these issues, FIX Protocol Limited established the Algorithmic Trading Working Group in Q3 2004. [1] The initial focus of the group was to solve the first of these issues, which it did by defining a new group of fields, the StrategyParametersGrp, made up of FIX tags 957 through 960 – these tags were formally introduced with the release of FIX 5.0 in Q4 2006.
The algorithm that is used to match orders varies from system to system and often involves rules around best execution. [ 1 ] The order matching system and implied order system or Implication engine is often part of a larger electronic trading system which will usually include a settlement system and a central securities depository that are ...
In 2002 Tradebook launched Futures trading, followed by US Listed options in 2006 [4] and an FX marketplace in 2007. [5] In 2010, Bloomberg Tradebook developed B-Dark, an algorithm to provide information to traders about where their orders were being filled, even for trades occurring in private electronic transaction networks, or dark pools. [6]
Such manipulations are done typically through abusive trading algorithms or strategies that close out pre-existing option positions at favorable prices or establish new option positions at advantageous prices. In recent years, there have been a number of algorithmic trading malfunctions that caused substantial market disruptions.
At that level, some traders realized the potential benefits that an automatic replication system could produce if built. Around 2005, Copy trading and mirror trading developed from automated trading, also known as algorithmic trading. It was an automated trading system where traders were sharing their own trading history that others could ...