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Trading bots, ultrafast extreme events, UEEs

To identify activities that might be triggered by automated systems, the authors defined something called an ultrafast extreme event (UEE). These are cases where a stock price moved at least 10 consecutive times in the same direction, all within 1,500 milliseconds. The total magnitude of these mini-crashes and rises had to be at least 0.8 percent. That may not seem like much, but it represents over 30 standard deviations from the normal run of trading. (source infra)

Trading bots create extreme events faster than humans can react | Ars Technica: "....the authors make a pretty compelling case that fast trading systems, coupled to a limited number of trading strategies, have caused a fundamental change in the behavior of the stock market. This shift leads to sudden changes in the value of stocks that aren't linked to any underlying financial factors. (In most cases, the change seems to be transient, and stocks return to their former value rapidly.) What's not at all clear is what triggers these UEEs, and whether changes in market regulations or trading strategies could eliminate them."

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