This is a type of trading that has become more prevalent over recent years. It is where computers connected by the latest fibre optics technology are programmed to make thousands of trades a day betting in tiny differences in share price movements. Backed by engineers and mathematicians they now account for approximately 55% of all US stock trading. On the positive side they provide better liquidity for markets as there is always some algorithm willing to trade when you want to buy or sell a share.
However, when these programs go wrong they go very wrong. Knight Capital Group lost $440 million dollars in less than an hour as a rogue algorithm automatically traded the firm out of existence. Last month the technology publication Wired produced a fascinating article looking into this new force shaping world markets. For those of you interested in finding out more about, we would recommend reading the article in full here http://www.wired.com/business/2012/08/ff_wallstreet_trading/.