When volatility is high, equity is low, and the dilution effect is soaring short term financing is harder to get and the roll over ends. Margins erode the capital base and equity shrinks and if Brokers and Dealers cannot get a capital infusion they are forced to sell assets at fire sale prices. This loss spiral will eventually drive them into bankruptcy.Let’s take a look how much Broker/Dealers assets are financed in the overnight repomarket?

Without doubt, US broker-dealers’ efforts to diversify their funding sources have not gone far enough, with most of the large groups still largely reliant on repo, a type of cheap financing which contributed to the fall of Lehman.