An automated trading system (ATS), a subset of algorithmic trading, uses a computer program to create buy and sell orders and automatically submits the orders to a market center or exchange.[1] The computer program will automatically generate orders based on predefined set of rules using a trading strategy which is based on technical analysis, advanced statistical and mathematical computations or input from other electronic sources.[2]
These automated trading systems are mostly employed by investment banks or hedge funds, but are also available to private investors using simple online tools. An estimated 70% to 80% of all market transactions are carried out through automated trading software, in contrast to manual trades.[3][4]
Automated trading systems are often used with electronic trading in automated market centers, including electronic communication networks, "dark pools", and automated exchanges.[5] Automated trading systems and electronic trading platforms can execute repetitive tasks at speeds orders of magnitude greater than any human equivalent. Traditional risk controls and safeguards that relied on human judgment are not appropriate for automated trading and this has caused issues such as the 2010 Flash Crash. New controls such as trading curbs or 'circuit breakers' have been put in place in some electronic markets to deal with automated trading systems.[6]