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.

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RELATED FAQS
  1. What is the difference between compulsory and voluntary liquidation?

    Liquidation is the process where a firm's assets and liabilities are terminated, realized and subsequently distributed. In ... Read Full Answer >>
  2. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  3. How does a broker decide which customers are eligible to open a margin account?

    Brokers have the sole discretion to determine which customers may open margin accounts with them, although there are regulations ... Read Full Answer >>
  4. Are there leveraged ETFs that follow the retail sector?

    There are many exchange-traded funds (ETFs) that track the retail sector or elements of the retail sector, and some of those ... Read Full Answer >>
  5. What is the interest rate offered on a typical margin account?

    Interest rates on margin accounts vary according to the size of the loan and the brokerage firm being used. Generally, interest ... Read Full Answer >>
  6. What are some common cash-debt strategies that occur during a spinoff?

    Cash-debt strategies that are commonly used to in a spinoff to enable the parent company to monetize the spinoff are debt/equity ... Read Full Answer >>

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