Forced Liquidation

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Liquidation Value

    The total worth of a company's physical assets when it goes out ...
  2. Voluntary Liquidation

    A corporate liquidation that has been approved by the shareholders ...
  3. House Call

    A brokerage house notification that the customer's equity in ...
  4. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  5. Margin Debt

    1. The dollar value of securities purchased on margin within ...
  6. Initial Margin

    The percentage of the purchase price of securities (that can ...
RELATED FAQS
  1. What's the difference between the coverage ratio and the levered free cash flow to ...

    Coverage ratios focus on a company’s ability to manage its debt, while the levered free cash flow to enterprise value ratio ... Read Full Answer >>
  2. How do I learn technical skills for trading commodities?

    Many resources are available for those seeking to learn to trade commodities, also known as futures, directly from the major ... Read Full Answer >>
  3. What are the different sources of business risk?

    A certain risk level is inherent in running a business. A company cannot completely eliminate risk, but it can control or ... Read Full Answer >>
  4. How does DuPont Analysis measure financial leverage?

    DuPont analysis uses something called the "equity multiplier" to measure financial leverage. The equity multiplier is calculated ... Read Full Answer >>
  5. How does additional equity financing affect existing shareholders?

    Additional equity financing dilutes existing shareholders. There are two types of candidates for equity financing. One is ... Read Full Answer >>
  6. What is the equity multiplier's affect on Return on Equity (ROE)?

    In the three-step DuPont analysis model, the equity multiplier is one of the three components of return on equity (ROE), ... Read Full Answer >>
Related Articles
  1. Investing Basics

    7 Investing Mistakes And How To Avoid Them

    No investor is flawless. Here are some common investing fallacies and a step-by-step guide on how to avoid them.
  2. Options & Futures

    Margin Trading

    Find out what margin is, how margin calls work, the advantages of leverage and why using margin can be risky.
  3. Brokers

    Private Equity's Returns Are Tempered By Its Risks

    Private equity firms adopt approaches to quickly hike up earnings and boost returns, but these investments come with big risks too.
  4. Credit & Loans

    The Pros & Cons Of Personal Loans vs. Credit Cards

    One is not like the other. We help you decide where to borrow money from.
  5. Brokers

    Interested in Derivative Products? Try CFDs

    A short article about the main risks and rewards of CFDs. These derivatives can help boost returns using leverage, but they could also magnify losses.
  6. Fundamental Analysis

    What is Gearing?

    Gearing, also called leverage, is the degree to which a company’s operations are funded by lenders versus shareholders.
  7. Stock Analysis

    Is Prospect Capital Exposed To Elevated Losses?

    According to a federal government report, the quality of leveraged loans has begun to deteriorate. Prospect Capital specializes in these types of loans.
  8. Mutual Funds & ETFs

    Buying ETFs on Margin Versus Leveraged ETFs

    Leveraged ETFs and investing in an ETF on margin both have their advantages and disadvantages.
  9. Investing

    Ready To Invest In Financial Leverage Funds?

    Whenever you invest in a leveraged financial fund or are thinking about doing so, it's important to know the risks that could weigh on its returns.
  10. Investing

    Buying on Margin

    When an investor buys on margin, he or she pays a portion of the stock price – called the margin -- and borrows the rest from a stockbroker. The purchased stocks then serve as collateral for ...

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center