Arbitrage Trading Program - ATP

DEFINITION of 'Arbitrage Trading Program - ATP'

A computer program used to place simultaneous orders for stock or commodities futures and the underlying stocks or commodities, usually for large volume, institutional trades. One order will be a long or short position on a futures contract, and the other order will be for the opposition position on the underlying. The ATP attempts to exploit price variations through a process called "index arbitrage."

BREAKING DOWN 'Arbitrage Trading Program - ATP'

Arbitrage trading programs are executed via program trading, or trading by automated computer systems that follow predetermined orders or algorithms. Program trades account for approximately 30% of daily volume on the New York Stock Exchange. These computerized trading systems are able to identify brief instances of mispricing, and place trades while there is an opportunity to profit from arbitrage.

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RELATED FAQS
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    Arbitrage is basically buying in one market and simultaneously selling in another, profiting from a temporary difference. ... Read Full Answer >>
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