We present the Extreme-Horizon (EH) cosmological simulation: EH models galaxy formation with stellar and AGN feedback and uses a very high resolution in the intergalactic and circumgalactic medium. The high resolution in low-density regions results in smaller-size massive galaxies at redshift $z=2$, in better agreement with observations compared to other simulations. This results from the improved modeling of cold gas flows accreting onto galaxies. Besides, the EH simulation forms a population of particularly compact galaxies with stellar masses of $10^{10-11}$,M$_sun$ that are reminiscent of observed ultracompact galaxies at $zsimeq2$. These objects form mainly through repeated major mergers of low-mass progenitors, independently of baryonic feedback mechanisms. This formation process can be missed in simulations using a too low resolution in low-density intergalactic regions.
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