Definition of High Frequency and Algorithmic Trading

Many sophisticated institutions invest significant amounts of money in the development of proprietary computerized trading models. These trading modes are often driven by the use of sophisticated algorithms . An Algorithm is a set of mathematical procedures and instructions that are designed to execute orders based on many variables. These computerized trading models are able to take advantage of trading opportunities that last only nanoseconds.

Applying "High Frequency and Algorithmic Trading" to Securities Exams:

The trading algorithms are the basis of the high frequency trading module which route and display a substantial amount of orders for execution based on market conditions that may only last a nanosecond. If the orders are not executed the orders may be immediately canceled by the trading program. The constant routing and canceling of orders can result in flickering quotes. A firm that executes a customer order at an inferior price due to a flickering quote in another market will not have committed a violation due to the extremely temporary nature of the flickering quote. This is just one of many of the topics you will need to know to pass the series 24 exam.

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