<s>
An	O
automated	B-Algorithm
trading	I-Algorithm
system	I-Algorithm
(	O
ATS	O
)	O
,	O
a	O
subset	O
of	O
algorithmic	O
trading	O
,	O
uses	O
a	O
computer	O
program	O
to	O
create	O
buy	O
and	O
sell	O
orders	O
and	O
automatically	O
submits	O
the	O
orders	O
to	O
a	O
market	O
center	O
or	O
exchange	O
.	O
</s>
<s>
Automated	B-Algorithm
trading	I-Algorithm
systems	I-Algorithm
are	O
often	O
used	O
with	O
electronic	O
trading	O
in	O
automated	O
market	O
centers	O
,	O
including	O
electronic	O
communication	O
networks	O
,	O
"	O
dark	O
pools	O
"	O
,	O
and	O
automated	O
exchanges	O
.	O
</s>
<s>
Automated	B-Algorithm
trading	I-Algorithm
systems	I-Algorithm
and	O
electronic	O
trading	O
platforms	O
can	O
execute	O
repetitive	O
tasks	O
at	O
speeds	O
orders	O
of	O
magnitude	O
greater	O
than	O
any	O
human	O
equivalent	O
.	O
</s>
<s>
Traditional	O
risk	O
controls	O
and	O
safeguards	O
that	O
relied	O
on	O
human	O
judgment	O
are	O
not	O
appropriate	O
for	O
automated	B-Algorithm
trading	I-Algorithm
and	O
this	O
has	O
caused	O
issues	O
such	O
as	O
the	O
2010	O
Flash	O
Crash	O
.	O
</s>
<s>
New	O
controls	O
such	O
as	O
trading	O
curbs	O
or	O
'	O
circuit	O
breakers	O
 '	O
have	O
been	O
put	O
in	O
place	O
in	O
some	O
electronic	O
markets	O
to	O
deal	O
with	O
automated	B-Algorithm
trading	I-Algorithm
systems	I-Algorithm
.	O
</s>
<s>
The	O
automated	B-Algorithm
trading	I-Algorithm
system	I-Algorithm
determines	O
whether	O
an	O
order	O
should	O
be	O
submitted	O
based	O
on	O
,	O
for	O
example	O
,	O
the	O
current	O
market	O
price	O
of	O
an	O
option	O
and	O
theoretical	O
buy	O
and	O
sell	O
prices	O
.	O
</s>
<s>
Accordingly	O
,	O
as	O
the	O
price	O
of	O
the	O
underlying	O
security	O
changes	O
,	O
a	O
new	O
theoretical	O
price	O
may	O
be	O
indexed	O
in	O
the	O
look-up	O
table	O
,	O
thereby	O
avoiding	O
calculations	O
that	O
would	O
otherwise	O
slow	O
automated	B-Algorithm
trading	I-Algorithm
decisions	O
.	O
</s>
<s>
A	O
distributed	O
processing	O
on-line	O
automated	B-Algorithm
trading	I-Algorithm
system	I-Algorithm
uses	O
structured	O
messages	O
to	O
represent	O
each	O
stage	O
in	O
the	O
negotiation	O
between	O
a	O
market	O
maker	O
(	O
quoter	O
)	O
and	O
a	O
potential	O
buyer	O
or	O
seller	O
(	O
requestor	O
)	O
.	O
</s>
<s>
Before	O
actually	O
using	O
the	O
automated	B-Algorithm
trading	I-Algorithm
or	O
the	O
underlying	O
algorithm	O
,	O
traders	O
are	O
able	O
to	O
evaluate	O
their	O
rules	O
using	O
the	O
old	O
data	O
.	O
</s>
<s>
Automated	B-Algorithm
trading	I-Algorithm
systems	I-Algorithm
allow	O
users	O
to	O
simultaneously	O
trade	O
in	O
multiple	O
accounts	O
which	O
allows	O
them	O
to	O
diversify	O
their	O
portfolio	O
.	O
</s>
<s>
The	O
concept	O
of	O
automated	B-Algorithm
trading	I-Algorithm
system	I-Algorithm
was	O
first	O
introduced	O
by	O
Richard	O
Donchian	O
in	O
1949	O
when	O
he	O
used	O
a	O
set	O
of	O
rules	O
to	O
buy	O
and	O
sell	O
the	O
funds	O
.	O
</s>
<s>
The	O
early	O
form	O
of	O
an	O
Automated	B-Algorithm
Trading	I-Algorithm
System	I-Algorithm
,	O
composed	O
of	O
software	O
based	O
on	O
algorithms	O
,	O
that	O
have	O
historically	O
been	O
used	O
by	O
financial	O
managers	O
and	O
brokers	O
.	O
</s>
<s>
Now	O
,	O
Automated	B-Algorithm
Trading	I-Algorithm
System	I-Algorithm
is	O
managing	O
huge	O
assets	O
all	O
around	O
the	O
globe	O
.	O
</s>
<s>
In	O
2014	O
,	O
more	O
than	O
75	O
percent	O
of	O
the	O
stock	O
shares	O
traded	O
on	O
United	O
States	O
exchanges	O
(	O
including	O
the	O
New	O
York	O
Stock	O
Exchange	O
and	O
NASDAQ	O
)	O
originated	O
from	O
automated	B-Algorithm
trading	I-Algorithm
system	I-Algorithm
orders	O
.	O
</s>
<s>
Automated	B-Algorithm
trading	I-Algorithm
system	I-Algorithm
can	O
be	O
based	O
on	O
a	O
predefined	O
set	O
of	O
rules	O
which	O
determine	O
when	O
to	O
enter	O
an	O
order	O
,	O
when	O
to	O
exit	O
a	O
position	O
,	O
and	O
how	O
much	O
money	O
to	O
invest	O
in	O
each	O
trading	O
product	O
.	O
</s>
<s>
Backtesting	B-Algorithm
software	I-Algorithm
enables	O
a	O
trading	O
system	O
designer	O
to	O
develop	O
and	O
test	O
their	O
trading	O
systems	O
by	O
using	O
historical	O
market	O
data	O
and	O
optimizing	O
the	O
results	O
obtained	O
with	O
the	O
historical	O
data	O
.	O
</s>
<s>
Although	O
backtesting	O
of	O
automated	B-Algorithm
trading	I-Algorithm
systems	I-Algorithm
cannot	O
accurately	O
determine	O
future	O
results	O
,	O
an	O
automated	B-Algorithm
trading	I-Algorithm
system	I-Algorithm
can	O
be	O
backtested	O
by	O
using	O
historical	O
prices	O
to	O
see	O
how	O
the	O
system	O
would	O
have	O
performed	O
theoretically	O
if	O
it	O
had	O
been	O
active	O
in	O
a	O
past	O
market	O
environment	O
.	O
</s>
<s>
The	O
goal	O
of	O
an	O
automated	B-Algorithm
trading	I-Algorithm
system	I-Algorithm
is	O
to	O
meet	O
or	O
exceed	O
the	O
backtested	O
performance	O
with	O
a	O
high	O
efficiency	O
rating	O
.	O
</s>
<s>
Automated	B-Algorithm
trading	I-Algorithm
,	O
or	O
high-frequency	O
trading	O
,	O
causes	O
regulatory	O
concerns	O
as	O
a	O
contributor	O
to	O
market	O
fragility	O
.	O
</s>
<s>
FINRA	O
has	O
stated	O
that	O
it	O
will	O
assess	O
whether	O
firms	O
 '	O
testing	O
and	O
controls	O
related	O
to	O
algorithmic	O
trading	O
and	O
other	O
automated	B-Algorithm
trading	I-Algorithm
strategies	O
are	O
adequate	O
in	O
light	O
of	O
the	O
U.S.	O
Securities	O
and	O
Exchange	O
Commission	O
and	O
firms	O
 '	O
supervisory	O
obligations	O
.	O
</s>
<s>
This	O
market	O
disruption	O
became	O
known	O
as	O
the	O
Flash	O
Crash	O
and	O
resulted	O
in	O
U.S.	O
regulators	O
issuing	O
new	O
regulations	O
to	O
control	O
market	O
access	O
achieved	O
through	O
automated	B-Algorithm
trading	I-Algorithm
.	O
</s>
