It pretty much happened to Knight Trading. They turned on a dev trading algo and wound up acquiring a massive amount of positions (and thus risk). Their clear

It pretty much happened to Knight Trading. They turned on a dev trading algo and wound up acquiring a massive amount of positions (and thus risk). Their clearing firm forced them to close all those positions and the cost of crossing the bid-ask spread wiped them out. Never read the book (http://www.knightmareonwallstreet.com/ http://www.knightmareonwallstreet.com/) but watched it happen in real time from the trade desk at a different firm. You could also say it happens to small banks. If you fail some sort of FDIC testing, you're classified as at-risk and they force you to sell to a larger bank so as not to risk depositor funds.