algorithmic trading
n. Securities trading in which orders are generated by algorithms and executed by computers operating over high-speed links to market exchanges.
Considered cutting edge on Wall Street these days, algorithmic trading involves predicting prices and volume several seconds forward. Many of the strategies originated within small, proprietary trading houses.
—Peter Chapman, “Can Automation Save Schwab?,” Traders Magazine, April 01, 2003
The term "statistical arbitrage" is something of a misnomer. "Arbitrage implies that we are locking in a risk-free profit, but that isn’t what we're doing," says David Shaw, chairman and founder of D.E. Shaw, one of the oldest statistical arb shops, founded in 1988. A more accurate label, in his view: algorithmic trading. Essentially, statistical arbitrage strategies are driven by computer algorithms that are designed to recognize stock price patterns and to identify deviations that can be expected to quickly revert to the norm.
—“Come together,” Institutional Investor, January 01, 2002
1988 (earliest)
Another secretive firm is Morgan, which hired a Columbia University computer scientist for its Automated Analytical Trading Group. Morgan, which declined requests to discuss its use of minisupercomputers, has placed an ad in technical journals to recruit "algorithmic trading scientists."
—Ira Sager, “Giants of computer world lure financial brethren,” Wall Street Computer Review, May 01, 1988