Algorithmic Trading
Algo Trading
Algo Trading or Algorithmic Trading is based on technology driven pre programmed mathematical model based stock trading which is quite popular in developed nations and is expected to gain momentum over the next few years in India as well .
Globally Algo Trading is pegged at 3 % of the total turn over.
“Make wise transaction decisions with Algo Trading”.
A trading system utilizes very advanced mathematical models for making transaction decisions in the financial markets. The strict rules built into the model attempt to determine the optimal time for an order to be placed that will cause the least amount of impact on a stock’s price. Large blocks of shares are usually purchased by dividing the large share block into smaller lots and allowing the complex algorithms to decide when the smaller blocks are to be purchased. In electronic algorithmic trading or automated trading, also known as algo trading , black box trading or robo trading.
The use of algorithmic trading is most commonly used by large institutional investors due to the large amount of shares they purchase every day. Complex algorithms allow these investors to obtain the best possible price without significantly affecting the stock’s price and increasing purchasing costs. Its widely used by pension funds, mutual funds and some hedge funds.
A special class of Algorithmic trading is HFT (High-frequency trading), High-frequency trading (HFT) is the use of sophisticated technological tools to trade securities like stocks or options, and is typically characterized by several distinguishing features. It is highly quantitative, employing computerized algorithms to analyze incoming market data and implement proprietary trading strategies; An investment position is held only for very brief periods of time – from 1 seconds to 1 hours – and rapidly trades into and out of those positions, sometimes 1000 or 10000 of times a day, At the end of a trading day there is no net investment position.
Positions are taken in equities, options, futures, ETFs, currencies, and other financial instruments that can be traded electronically.
By 2010 high-frequency trading accounted for over 70% of equity trades in the US and was rapidly growing in popularity in Europe and Asia.
High-frequency trading has taken place at least since 1999, after the U.S. Securities and Exchange Commission (SEC) authorized electronic exchanges in 1998. At the turn of the 21st century HFT trades had an execution time of several seconds, whereas by 2010 this has decreased to milli- and even microseconds. Until recently high-frequency trading was a little-known topic outside the financial sector, with an article published by the New York Times in July 2009 being one of the first to bring the subject to the public’s attention.
Strategies like Trend following , Pair trading, Delta neutral strategies, Arbitrage.
Trend following is an investment strategy that tries to take advantage of long-term moves that seem to play out in various markets.
The pairs trade or pair trading is a market neutral trading strategy enabling traders to profit from virtually any market conditions: uptrend, downtrend, or sidewise movement.
delta neutral describes a portfolio of related financial securities, in which the portfolio value remains unchanged due to small changes in the value of the underlying security.
Arbitrage is the practice of taking advantage of a price difference between two or more markets.
Recently, HFT has become more prominent and controversial.
These algorithms or techniques are commonly given names such as “Stealth” (developed by the Deutsche Bank), “Iceberg”, “Dagger”, “Guerrilla”, “Sniper”, “BASOR” (developed by Quod Financial) and “Sniffer”.
In the U.S., high-frequency trading (HFT) firms represent 2% of the approximately 20,000 firms operating today, but account for 73% of all equity trading volume.
The HFT strategy was first made successful by Renaissance Technologies. High-frequency funds started to become especially popular in 2007 and 2008.
HFT has been a subject of intense public focus since the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission stated that both algorithmic and HFT contributed to volatility in the May 6, 2010 Flash Crash.
Market making is a set of HFT strategies that involves placing a limit order to sell (or offer) above the current market price or a buy limit order (or bid) below the current price in order to benefit from the bid-ask spread.
HFT is often confused with low-latency trading that uses computers that execute trades within milliseconds, or “with extremely low latency” in the jargon of the trade.
Most of the algorithmic strategies are implemented using modern programming languages.
Though its development may have been prompted by decreasing trade sizes caused by decimalization, algorithmic trading has reduced trade sizes further. Jobs once done by human traders are being switched to computers. The speeds of computer connections, measured in milliseconds and even microseconds, have become very important.
2G THE BIG GAME OF SCAM.
The 2G spectrum scandal involved officials in the government of India illegally undercharging mobile telephony companies for frequency allocation licenses, which they would use to create 2G subscriptions for cell phones. The shortfall between the money collected and the money which the law mandated to be collected is estimated to be 176,645 crore (US$35.33 billion) by Comptroller and Auditor General of India based on 3G auction prices. The issuing of licenses occurred in 2008, but the scam came to public notice when the Indian Income Tax Department was investigating political lobbyist Nira Radia.
The government’s investigation and the government’s reactions to the findings in the investigation were the subject of debate, as were the nature of the Indian media’s reactions. The discussion about the reactions to the 2G spectrum scam became known in the media as the Nira Radia tapes controversy.
Much of the credit of bringing this whole scam into the public light (by pursuing it in the court of law) goes to Subramanian Swamy who is the chief petitioner for this case in the court of law.
A. Raja arranged the sale of the 2G spectrum licenses below their market value. Swan Telecom, a new company with few assets, bought a license for 1,537 crore (US$307.4 million). Shortly thereafter, the board sold 45% of the company to Etisalat for 4,200 crore (US$840 million). Similarly, a company formerly invested in real estate and not telecom, the Unitech Group, purchased a license for 1,661 crore (US$332.2 million) and the company board soon after sold a 60% stake in their wireless division for 6,200 crore (US$1.24 billion) to Telenor. The nature of the selling of the licenses was that licenses were to be sold at market value, and the fact that the licenses were quickly resold at a huge profit indicates that the selling agents issued the licenses below market value.
Nine companies purchased licenses and collectively they paid the Ministry of Communications and Information Technology’s telecommunications division 10,772 crore (US$2.15 billion). The amount of money expected for this licensing by the Comptroller and Auditor General of India was 176,000 crore (US$35.2 billion). The report on the details of the financials involved framed by CAG could be found at the website of Comptroller and auditor general of India (Supreme audit institution of Government of India).
In early November 2010 Jayalalithaa accused the state chief minister M Karunanidhi of protecting A. Raja from corruption charges and called for A. Raja’s resignation. By mid November A. Raja resigned.
In mid November comptroller Vinod Rai issued show-cause notices to Unitech, S Tel, Loop Mobile, Datacom (Videocon), and Etisalat to respond to his assertion that all of the 85 licenses granted to these companies did not have the up-front capital required at the time of the application and were in other ways illegal. Some media sources have speculated that these companies will receive large fines but not have their licenses revoked, as they are currently providing some consumer service.
BUT today case results is cancelled 122 issued licenses AFTER JAN 2008. so 540 Mhz of spectrum becomes available, 2G decision may be bad for banking and IT sectors, huge lone given to licence holders by banks. but finally 2G case results will make janata party as National responsible political party and also Subramanian Swamy as political hero.
Details of RIL Q3 Results + Buy back of shares.
What is Buy back ?
The repurchase of outstanding shares by a company in order to reduce the number of shares on the market. Companies will buy back shares either to increase the value of shares still available, or to eliminate any threats by shareholders who may be looking for a controlling stake.
Details of RIL Buy back of shares
“The RIL board on Friday approved the buyback of 12 crore equity shares of Rs 10 each, at a price not exceeding Rs 870 per share, up to an aggregate amount not exceeding Rs 10,440 crore from the open market through stock exchanges,” said a RIL statement on Friday.
Announces $2 bn buyback of shares
the company promised to return cash to shareholders by pledging a $2-billion buyback of up to 3.7% of its shares at a 10% premium over current price.
@ global energy majors have done large share buybacks. major share purchases include buyback of
Exxon Mobil ($100 billion),
Conoco-Phillips ($19 billion),
Chevron ($13.5billion),
BP ($9.6 billion),
Shell ($7.9 billion),
BASF ($3.5 billion),
Dow Chemicals ($2.4 billion).
While in India RIL’s Rs 10,440 crore of share buyback is the largest in Indian corporate history.
Recent buyback by Indian corporates include
Rs 270 crore of share buyback by Deccan Chronicle in November 2010,
Rs 110 crore of share buyback by Balram Chini in February 2011,
Rs 90 crore of share buyback by SRF Industries in February 2011,
Rs 80 crore of share buyback by Crisil in September 2010.
Details of RIL Q3 Results
Reliance Industries (RIL) has posted a net profit of Rs 4440 crore, down 13.6% year-on-year on the back of lower refining and petchem margins. Sales, however grew 40.2% to Rs 87,480 crore.
While the company’s gross refining margins declined to USD 6.8 per barrel from USD 9 per barrel and its petchem stood at 10.9% versus 11.5% year-on-year.
RIL shares, which fell 35% in 2011, closed 1% up on Friday at Rs 793 in the volatile market ahead of the buyback announcement and Q3 results.
Source : http://www.ril.com/rportal/jsp/eportal/media/MediaHome.jsp
The LBMA Survey
About the London Bullion Market Association
The LBMA is the international trade association that represents the wholesale over-the-counter market for gold and silver bullion. The LBMA undertakes many activities on behalf of its members, including the setting of good delivery and refining standards, the organisation of conferences and other events, and serving as a point of contact for the regulatory authorities.
The LBMA’s survey of 26 contributors showed all but 3 participants expected gold to hit an all-time high in 2012, with a majority of 19 of them forecasting gold to reach a high above $2,000 an ounce.
They also forecast gold to average $1,766.00 an ounce this year, compared with an average of $1,572.00 in 2011, the survey showed.
The gold price rose to a record $1,920.30 an ounce in September and gained 10 percent in price in an 11th consecutive year of gains in 2011.
Fear among investors over the debasement of so-called fiat currencies such as the dollar, the euro or the Swiss franc, together with the euro zone debt crisis and the bullish impact of ongoing central bank buying were major drivers for gold.
MY VIEW ON ABOVE SURVEY :
The LBMA is the one association on bullion market in the London. Here all 26 contributors showed there pridiction for year 2012 gold price. which is Maximum average price for gold high is $2,055 and Minimum average price for gold low is $1443 and than total of averages is come to $1766.
now Commodities Futures Gold prise is running at $1621 then survey only showing price of $1766 means only difference of $145 is needed to achive there target.
In respect of above survey I also compare the PRICE in INR is us under :
IF $1=RS.52.75
if now gold price are running @ $1621 while in MCX it is arround Rs.28409 is equal to $538.81.
then if gold makes high of $2055 than in MCX it will arround RS.36014.8 is equal to $683.0688
and if gold makes low of $ 1433 than in MCX it will arround RS.25289.22 is equal to $479.6439.
so the LBMA survey forecast 2012 predicts price of $1766 than in MCX it will arround RS.30949.95 is equal to $587.0071.
means the probablity of gold high is arround RS.36000 and the probablity of gold low is arround RS.25300 and the final TARGET for gold price in 2012 is RS.30950.
by the way this is only survey so don’t go blank minded on this. always follow market rules!!!!.
source :-
http://www.lbma.org.uk/assets/LBMA%20Press%20Release%202012%20Forecast%2020120106.pdf
WELCOME 2012
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2012.
