Existing theory does not seem to provide a sufficient explanation of how flash events occur; therefore additional research based on broader viewpoints, including on detailed market structures and behavioral patterns of market participants, and theoretical research are awaited. Effects of Financial Regulations The second example is the effects of global financial regulatory reforms following the financial crisis.
It is necessary to strengthen financial regulations to restrain excess risk taking by financial institutions and investors and the accumulation of financial imbalances, both of which were causes of the financial crisis. However, there is a possibility that, depending on the content of the regulations and the implementation processes, market making and various arbitrage activity by financial institutions would be affected more than expected.