Modal patterns in market data stump Morgan Stanley quants

New research suggests algo traders are changing the market microstructure

Quants have discovered a distinctive modal pattern in market data

Data scientists at Morgan Stanley are scratching their heads after observing a mysterious modal pattern in market data, which they attribute to systematic trading activity.

When Morgan Stanley’s electronic trading group studied the time interval between trades of Sony Corporation’s stocks on the Tokyo Stock Exchange on February 29, 2012, they expected to see a pattern of exponential decay, with bigger gaps between trades as the number of trades decreases.

Instead, they found a strange modal

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