The Exchange uses Mark Price as a means to help avoid unnecessary liquidations and to manage user position risk. Forced Liquidation happens when Margin Balance falls below the Maintenance Margin, it is executed progressively to minimize the market impact of the execution. However, traders who hold relatively small positions may experience full position liquidation.
Margin Balance is calculated as follows:
Margin Balance = Collateral Balance + Unrealized PnL
Margin Balance = [Wallet Balance - Non-eligible Collateral Balance - Collateral Haircut] + Unrealized PnL
What happens if the Margin Balance falls below the Initial Margin?
If the Margin Balance falls below the Initial Margin, then:
All open orders that would increase the position will be automatically canceled, and new orders that would increase the position will be rejected
Only orders that would decrease the position will be allowed (e.g. you can only place sell orders if you hold a long position)
A warning email will be sent as a reminder to monitor your position closely, to add more collateral, or reduce the position.
What happens if the Margin Balance falls below the Maintenance Margin?
If the Margin Balance falls below the Maintenance Margin, then:
All open orders will be automatically canceled, and all new orders will be rejected
Withdrawals will be suspended during this time
The position(s) will be progressively liquidated until the Margin Balance is greater than the Initial Margin and the Maintenance Margin
An email will be sent as a confirmation that the position(s) have been progressively liquidated
All Liquidation Orders will be subject to a liquidation fee, which will be added to
the Insurance Fund. Liquidation fees can be found here.