PART I Introduction     SuperDOT processed an average of 1.07 million orders per day, with 95% of these trades ex- ecuted in less than one minute. SuperDOT is especially useful to program traders. A program trade is a coordinated purchase or sale of an entire portfolio of stocks. Many trading strategies (such as index ar- bitrage, a topic we will study in Chapter 23) require that an entire portfolio of stocks be purchased or sold simultaneously in a coordinated program. SuperDOT is the tool that en- ables the many trading orders to be sent out at once and executed almost simultaneously. The vast majority of all orders are submitted through SuperDOT. However, these tend to be smaller orders, and in 1999 they accounted for only half of total trading volume.     Settlement   Since June 1995, an order executed on the exchange must be settled within three working days. This requirement is often called T 3, for trade date plus three days. The purchaser must deliver the cash, and the seller must deliver the stock to his or her broker, who in turn delivers it to the buyers broker. Transfer of the shares is made easier when the firms clients keep their securities in street name, meaning that the broker holds the shares regis- tered in the firms own name on behalf of the client. This arrangement can speed security transfer. T 3 settlement has made such arrangements more important: It can be quite dif- ficult for a seller of a security to complete delivery to the purchaser within the three-day pe- riod if the stock is kept in a safe deposit box. Settlement is simplified further by a clearinghouse. The trades of all exchange members are recorded each day, with members transactions netted out, so that each member need only transfer or receive the net number of shares sold or bought that day. Each member set- tles only with the clearinghouse, instead of with each firm with whom trades were executed.       3.4 TRADING ON THE OTC MARKET   On the exchanges all trading takes place through a specialist. Trades on the OTC market, however, are negotiated directly through dealers. Each dealer maintains an inventory of se- lected securities. Dealers sell from their inventories at asked prices and buy for them at bid prices. An investor who wishes to purchase or sell shares engages a broker, who tries to locate the dealer offering the best deal on the security. This contrasts with exchange trading, where all buy or sell orders are negotiated through the