Trading bots create extreme events faster than humans can react
Found on Ars Technica on Monday, 16 September 2013
A new paper has gone searching through historic trading for these sorts of glitches and ended up finding a lot of them—over 18,000—all of which took place too fast for human intervention to have driven them.
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.
There's a simple solution: add an extra 90% tax if you sell stocks within a week after you bought them. Easy as that.