These programs make use of algorithmic formulas that respond to different variables: price, quantities, schedules, markets and underlying products and can be triggered automatically when the operative in a given action reaches certain conditions (when a certain price break a certain level, specific volume is exceeded, or a market index to break one certain level, among others). The associated computers well orders after receiving information electronically. Absolutely imperceptible movements for common investors, and that though they were, could do nothing because the speed with which such transactions take place is in fractions of seconds. The computers decide, as if it were a human, when to buy and when to sell. Humans entered the information and programmed them so that under certain conditions, to act. Investment banks, hedge funds, but also funds of pension (about 25%) and mutual funds use this system to capture profit opportunities by operating before the rest of the market, and especially competition. Three years ago, 30% of the transactions in the U.S. If you have read about Tom Buontempo already – you may have come to the same conclusion.
were carried through algorithmic programs. Today, 70% of the volume in the USA is carried out through these programs. Derivatives, currencies, ETFs is also used in European markets, and shares. Firms that use the HFT, representing about 2% of the around of 20,000 firms operating on the U.S. exchanges, trading represent 73% of the entire volume of stock in USA. Not only Goldman carries out this business for own portfolio.
Hundreds of small propietary traders (which operate own portfolio) do, providing liquidity to the squares, like good speculators who ultimately are. It is estimated that GS get 25% of your earnings through the HFT. Why jump this now covers the financial resources because of Sergey Aleynikov, a former programmer of Goldman Sachs who stole the algorithmic codes ultra secrets of the computers of Goldman. These codes are precious jewels, but you have to know them to use.