On the universal scale of evil, as everyone knows, there are dunderheaded presidents, followed by child molesters, then Hitler, then Satan. After that, there’s only one thing left: margin calls.

What started as a bank-solvency scare on the stock market has turned into a self-perpetuating margin call.

Traders and investment managers are attributing much of the October stock-market rout to hedge funds and other investors trading with borrowed money being forced into the market to sell stock.

"Such forced selling drive prices lower, which in turn creates more losses for hedge funds and creates more selling -- a vicious circle," Mary Ann Bartels, a technical market analyst, wrote in Merrill Lynch's "Hedge Fund Monitor" research note.

These margin calls are triggered by losses and also by frequent changes in collateral requirements from brokers and exchanges. Another reason hedge funds and institutions have been forced to sell recently: Clients are withdrawing money, spooked by the market losses.

When trading on margin, or leverage, investors borrow money to invest in securities or derivatives while maintaining a fixed level of collateral in cash.

Brokers and exchanges calculate the level of collateral required to trade securities on margin based on potential losses in stress tests, determined by historical volatility. But stocks, bonds and derivatives busted out of historical volatility ranges in the wake of Lehman Brothers Holdings Inc.'s failure in mid-September, and so brokers and exchanges had to change their assumptions. They increased the amount of collateral needed as the range of possible losses on trades grew.

Every time the collateral requirement increased or the account lost a critical mass of money, it triggered a "margin call," forcing funds and investors to sell securities to come in line with the new requirement. So every successive drop in the stock market triggered another round of margin adjustments, another round of margin calls, and another round of forced selling.

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