The Humble Crumble: What Predictive Analytics Can Tell Us About The Market

Iryna Veryzhenko () and Laurent Pataillot
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Iryna Veryzhenko: LIRSA - Laboratoire interdisciplinaire de recherche en sciences de l'action - Cnam - Conservatoire National des Arts et Métiers [Cnam]
Laurent Pataillot: GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - EM - EMLyon Business School - CNRS - Centre National de la Recherche Scientifique, IÉSEG School Of Management [Puteaux]

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Abstract: This paper examines how the evolution of a protective algorithm, used in conjunction with a physical speed bump by a certain financial exchange (IEX) to deter high-frequency trading, provides a lens to understand changing market dynamics and fairness in modern financial markets. This system aims to protect regular investors by detecting when stock prices are about to change rapidly: without such protection, ultra-fast traders can profit unfairly by acting on price changes microseconds before other market participants can react. Through the analysis of several versions of this "Crumbling Quote Indicator" (CQI), we track how the defenses of the exchange have evolved from statistical predictions to explicit rules about market behavior. The latest version moving to clear, deterministic rules with dynamic adjustments suggests that certain market scenarios have become reliably predictive of adverse price movements. This architectural evolution offers insights into both the changing nature of modern market microstructure and the industry's growing understanding of how to detect and prevent unfair trading advantages. Our findings contribute to the ongoing discussion about market fairness and how technological innovation, specifically predictive analytics, shapes modern market structure.

Keywords: information systems; financial market microstructure; predictive analytics; high-frequency trad- ing; speed bumps (search for similar items in EconPapers)
Date: 2025-05-21
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Published in Conférence Annuelle de l'Association Information & Management, May 2025, Lyon, France

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05090282

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