Report looking at forced selling and market stability.
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.