Research and analysis

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

Report looking at forced selling and market stability.


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

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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.