Why the most liquid holdings go first

The liquid asset is sold first even when the illiquid one caused the problem, and the reason is not laziness. The lender is buying certainty about a number, and the liquid asset is the only place that certainty is available on the day it needs it.

Measure the difference. A $340,000 sale of a broad equity index fund executes within a few basis points of mid: at 0.04 percent, the cost is $136. The same $340,000 sold in a single stock whose typical daily volume is $1,900,000 is 17.9 percent of a day's trading, and at an illustrative 1.6 percent of impact and spread the cost is $5,440. The difference of $5,304 is not the whole story, because the illiquid sale is also uncertain: it may take two sessions, and the second session's price is unknown when the first order is entered.

There is a second effect, and it works against the borrower rather than the lender. Suppose the account holds $340,000 of the index fund at a 74 percent advance rate and $520,000 of a single stock at 55 percent. Lending value is $251,600 plus $286,000 = $537,600 on a market value of $860,000, a blended rate of 62.5 percent. Sell the index fund entirely and the remaining market value of $520,000 supports a lending value of $286,000 — a blended rate of 55 percent. The most creditworthy collateral has left and the discount applied to what remains is 7.5 points higher.

So the sequence is rational for the lender and compounding for the borrower. Each round of selling improves the certainty of the current cure and worsens the quality of the collateral supporting the next test, which is one of the mechanisms behind a second call arriving inside the first.