The group, led by Neil Johnson, a physicist, studied what they called "ultrafast extreme events" in the markets over the past several years. "Ultrafast" means any spike or drop of more than 0.8 percent in a stock price over a period of a 1.5 seconds or less.
They found there was an explosion of such events, 18,520 in fact, after 2006 with most of the event rising rapidly between late 2006 and early 2009.
Such price movements couldn't have been driven by the news of the day, which is what typically cause human traders to get nervous, because the trades happened much too quickly.
What is the Value of Money?
Johnson's team also came up with a model of why computer programs and markets behave this way. The issue, they said, is similar to what happens in an ecosystem when a new predator is introduced. Ordinarily the predators and prey - the buyers and sellers - are in relative balance. But add a new factor, in this case, traders who can execute an order in a second, and that balance is disrupted. A tiny price movement in less than a second might sound benign, but there's always a chance that the markets will not regain their equilibrium. The Flash Crash was only one example of what might happen.