{"status":"ok","message-type":"work","message-version":"1.0.0","message":{"indexed":{"date-parts":[[2026,10,22]],"date-time":"2026-10-22T14:39:53Z","timestamp":1792679993097,"version":"4.5.0"},"posted":{"date-parts":[[2026]]},"group-title":"SSRN","reference-count":0,"publisher":"Elsevier BV","license":[{"start":{"date-parts":[[2026,1,1]],"date-time":"2026-01-01T00:00:00Z","timestamp":1767225600000},"content-version":"unspecified","delay-in-days":0,"URL":"https:\/\/www.uspto.gov\/ip-policy\/copyright-policy\/copyright-basics"}],"content-domain":{"domain":[],"crossmark-restriction":false},"short-container-title":[],"abstract":"<jats:p>Automated trading plays a major role in developed financial markets and is expanding in emerging markets. I study how homogeneity in automated trading decisions generates systemic risk and how regulation can contain it. I develop a continuous time model of a single trading day in which automated traders form correlated forecasts and operate at two speeds. Slow traders respond to the accumulated price movement, while fast traders respond to contemporaneous price changes. The price impact of their orders generates feedback, and leveraged positions face forced liquidation beyond a margin buffer. I measure systemic risk as the probability that the intraday dislocation exceeds a threshold defined relative to the same sector trading on uncorrelated signals. I analyze position limits, margin requirements, and a circuit breaker that reopens trading through a call auction. I show that greater market penetration, defined as sector size relative to residual market depth, lowers the critical homogeneity at which baseline stability is lost and increases the regulatory intensity required to contain risk. Under a strong auction pricing assumption, the reopening auction removes feedback amplification from the reopening price and reduces daily systemic risk. Illustrative calibrations for the United States, the European Union, and India show that rules calibrated to deep markets can leave thinner markets more exposed. These results support regulatory calibration that accounts for market depth, trading speed, and sector growth, particularly in rapidly automating emerging markets.<\/jats:p>","DOI":"10.2139\/ssrn.7652479","type":"posted-content","created":{"date-parts":[[2026,10,22]],"date-time":"2026-10-22T13:51:29Z","timestamp":1792677089000},"source":"Crossref","is-referenced-by-count":0,"title":["Homogeneity, Systemic Risk, and the Regulation of Automated Trading"],"prefix":"10.2139","author":[{"ORCID":"https:\/\/orcid.org\/0009-0005-9117-9871","authenticated-orcid":true,"given":"Siwon","family":"Lee","sequence":"first","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"78","container-title":[],"original-title":[],"deposited":{"date-parts":[[2026,10,22]],"date-time":"2026-10-22T13:51:29Z","timestamp":1792677089000},"score":1,"resource":{"primary":{"URL":"https:\/\/www.ssrn.com\/abstract=7652479"}},"subtitle":[],"short-title":[],"issued":{"date-parts":[[2026]]},"references-count":0,"URL":"https:\/\/doi.org\/10.2139\/ssrn.7652479","relation":{},"subject":[],"published":{"date-parts":[[2026]]},"subtype":"preprint"}}