Forced Liquidation

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DEFINITION of 'Forced Liquidation'

An action taken by brokerage houses that offsets and closes all positions within delinquent customer accounts in order to reduce exposure.

BREAKING DOWN 'Forced Liquidation'

Forced liquidations generally occur after warnings have been issued by the broker regarding the under-margin situation of an account. Should the account holder choose not to meet the margin requirements, the broker has the right to sell off the positions.