Research and analysis

Computer trading: leverage, forced asset sales, and market stability

Report looking at forced selling and market stability.

• From: Government Office for Science
• Published: 8 September 2011

Documents

Leverage, forced asset sales, and market stability: lessons from past market crises and the flash crash (DR9)

Ref: BIS/11/1228

PDF, 353 KB, 30 pages

This file may not be suitable for users of assistive technology.

Request an accessible format.

If you use assistive technology (such as a screen reader) and need a version of this document in a more accessible format, please email [email protected]. Please tell us what format you need. It will help us if you say what assistive technology you use.

Details

This report examines how forced selling can lead to market volatility and considers the impact of high frequency trading (HFT). It looks at:

• sources of forced selling and the role of leverage
• historical examples where forced selling has played a major role in market crashes
• market liquidity, information, and crashes
• high frequency traders and market liquidity
• the ‘Flash Crash’ and HFT

This review was commissioned as part of the Foresight project on the future of computer trading.

Published 8 September 2011