Ultrafast Trades Trigger Black Swan Events Every Day, Say Econophysicists - Technology Review Today, however, Neil Johnson at the University of Florida in Miami and a few pals reveal an important insight into what’s going on. These guys have found evidence that the behaviour of financial markets changes dramatically on timescales shorter than a certain threshold level. This threshold, they say, is more or less exactly equal to the human reaction times. The implication is clear. When humans trade and when they monitor the behaviour of machine trading, they can step in to override any unwanted behaviour. In that regime, markets behave in a specific way.  But when human oversight becomes impossible, because the trades take place faster than humans can react, a different behaviour occurs. That’s when flash crashes and rises set in. 
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Ultrafast Trades Trigger Black Swan Events Every Day, Say Econophysicists - Technology Review

Today, however, Neil Johnson at the University of Florida in Miami and a few pals reveal an important insight into what’s going on. These guys have found evidence that the behaviour of financial markets changes dramatically on timescales shorter than a certain threshold level. This threshold, they say, is more or less exactly equal to the human reaction times.

The implication is clear. When humans trade and when they monitor the behaviour of machine trading, they can step in to override any unwanted behaviour. In that regime, markets behave in a specific way. 

But when human oversight becomes impossible, because the trades take place faster than humans can react, a different behaviour occurs. That’s when flash crashes and rises set in. 

Source: technologyreview.com

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