How Do High-Frequency Trading Algorithms React to Mass Margin Calls?

HFT algorithms are programmed to detect and exploit market imbalances and rapid price changes. When mass margin calls occur, they create a sudden, forced wave of selling pressure and market volatility.

HFT algorithms react by rapidly widening their bid-ask spreads to protect against execution risk and by front-running known liquidation orders. They can also exacerbate the sell-off by executing rapid, short-selling strategies to profit from the downward momentum.