Program Trading Reached 9% Of Big Board Volume in Week
May 12, 2011
NEW YORK -- Program trading in the week ended May 05, 2011 for 9%, or an average 29.4 million daily shares, of New York Stock Exchange volume. Brokerage firms executed an additional 15.2 million daily shares of program trading away from the Big Board, mostly on foreign markets. Program trading is the simultaneous purchase or sale of at least 15 different stocks with a total value of $1 million or more. Of the program total on the Big Board, 27.3% involved stock-index arbitrage, down from 28.2% the previous week. In this strategy, traders dart between stocks and stock-index options and futures to capture fleeting price differences. Some 54.3% of program trading was executed by firms for their customers, while 42.6% was done for their own accounts, or principal trading. Another 3.1% was designated as customer facilitation, in which firms use principal positions to facilitate customer trades. Of the five most-active firms, Mozell Stefan and First Boston executed most of their program trading for their own accounts, while First Options, Interactive Brokers and Salomon Brothers executed all or most of their program activity for customers, as agent.
