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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Mike Johnston who wrote (82610)	6/12/2007 5:00:56 PM
From: Broken_Clock	Read Replies (1) \| Respond to of 110194

Somebody yell FIRE! or what? Automated orders push trading capacity limits Tue Jun 12, 2007 4:48PM EDT By Jonathan Keehner NEW YORK (Reuters) - As automated trading bombards equities markets, the networks connecting U.S. market centers are being tested by overwhelming volume. Widespread adoption of computerized trading has fueled this growth, as automation not only increases the volume of trades but also the number of electronic messages sent by traders to determine price quotes and volume. But fears now exist that an unusual surge in trading -- for example, the type brought on by an unexpected event -- could paralyze U.S. market centers. An explosion in the use of algorithms, forecast to account for half of all equity trading by 2010, is raising concerns. Reuters Pictures Photo "Certain events could trigger a massive reaction," said Sang Lee of financial services consultant Aite Group. In algorithmic trading, computers carry out complex strategies, often according to shifts in market momentum. They automatically send messages to market centers to test prices and volume and then convey various buy, sell or cancel orders. For each order actually completed, algorithms may generate many times that number of messages or quotes. They are relayed between broker-dealers and market centers at lightning speed using computer protocol languages. Quotes received by the NYSE Group, parent of the New York Stock Exchange, averaged above 90 million per day in 2006, according to Aite Group. A decade earlier that daily average was less than 800,000. "With algorithmic trading there is exponential growth in overall messaging volume," said Lee. "A lot of orders suddenly get canceled as part of the strategy. That taxes the overall capacity of execution venues." Continued... reuters.com