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

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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