How to Avoid Tight Coupling in Financial Markets

As financial markets become more tightly coupled, it increases the risk of propagation from a bad event in one market to another. The mechanism for the spread often is because of leverage. If there's a shock, if people are highly leveraged, they have to cover their positions very quickly. They get margin calls. And that happens intra day, or within a day or so. Not everybody wake up, so to speak, to what's going on so quickly.