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Mini flash crashes: Review, taxonomy and policy responses

Author

Listed:
  • Floris Laly

    (Louvain School of Management (LFIN‐LIDAM, UCLouvain))

  • Mikael Petitjean

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

Abstract

We focus on extreme price movements known as mini flash crashes (MFCs). After reviewing the literature, we provide a taxonomy based on a sample of MFCs identified by Nanex on the U.S. financial markets over a three‐year period. We detect significant differences between crashes and exchanges. In comparison to ‘up crashes', we find that ‘down crashes' exhibit lower absolute returns but have longer duration. We also show that the dynamics of MCFs varies across exchanges. For example, the MFCs on ARCA are on average both less severe and shorter in duration than those on the NASDAQ. We finally review all the key implications of MCFs in terms of public policy.

Suggested Citation

  • Floris Laly & Mikael Petitjean, 2020. "Mini flash crashes: Review, taxonomy and policy responses," Post-Print hal-02998436, HAL.
    • Handle: RePEc:hal:journl:hal-02998436
    DOI: 10.1111/boer.12221
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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