Automated trading system

An automated trading system (ATS) is a computer trading program that automatically submits trades to an exchange. As of the year 2010 more than 70% of the stock shares traded on the NYSE and NASDAQ are generated from automated trading systems. They are designed to trade stocks, futures and forex based on a predefined set of rules which determine when to enter a trade, when to exit it and how much to invest in it.

An example of an early ATS is Instinet. This allows traders to input trades invisibly to the market, with a crossing price determined by a VWAP measure. Instinet also enables anonymous conversations and negotiations to take place between bidders, and so reduces informational costs to the participants.

Recent platforms such as Algodeal have been launched to offer individuals the infrastructure to develop, backtest and assess quantitative strategies. Successful strategies are ultimately funded by Algodeal to be traded live on the platform with a share of the profits.

Trading system designers / programmers often test their automated trading systems on historical or current market data in order to determine whether the underlying algorithm guiding the system is profitable or not. Backtesting software are special trading platforms which enable trading system designer to develop and test their trading systems on historical market data while aiming to produce optimal historical results.

See also

• High-frequency trading
• Algorithmic trading
• Electronic trading platform
• Day trading software
• Technical analysis software