big day ahead, page-51

The "computer bots" use algorithmic trading to transact their order. Bids or offers are entered into the market via the broker's open interface device, based on a set of predefined rules.

It may be that a hedge fund wants to buy all the stocks in the ASX300, for example, in their appropriate denominations, to match movements in some other prescribed index.

Or, they might have a large order that they want completed over the day at, or near, the day's VWAP. So as the VWAP changes throughout the day, the algorithm decides when and how much to buy or sell. That way certain trades - e.g. upticks or down ticks - trigger certain resulting actions.

IMO, it is a very common tool for both index-matching type orders and brokers transacting insto orders in an "efficient" way, as the brokers' per-trade costs are usually very low.