Q&A  |  DEC 2004

Q&A by Don Bright

Stocks & Commodities V. 22:12 (20): Q&A by Don Bright SINCE YOU ASKED Confused about some aspect of trading? Professional trader Don Bright of Bright Trading (www.stocktrading.com), an equity trading corporation, answers a few of your questions. To submit a question, post your question to our website at http:// Message-Boards.Traders.com. Answers will be posted there, and selected questions will appear in a future issue of S&C. PROGRAM TRADES I read an online chat that talked about programmed trades occurring on the Nasdaq. I don’t trade that market, but found it interesting. It made me wonder, with more than 50% of NYSE volume in programs, whether it is important to investigate that process and learn more about it. Currently, I am knowledgeable with regard to index arbitration (program trades that work the premium), but know little about other types of program trades. To what extent does your training deal with that subject? I am hoping to find a resource for learning more about the subject generally. I appreciate any comment you might have — Steve First, we have to define program trades. There is the legal definition, which has rigid guidelines and is subject to trading curbs and other restrictions. I prefer the broader definition, which includes any type of automated response to the market via programming. This takes on many forms, from simple, if/then–type DDE-link (dynamic data exchange) activated or ActiveX responses, to elaborate massive line item order entries using FIX protocol.

by Don Bright