Perpetual futures liquidation management

When your position moves against you, your current margin may fall below the maintenance margin level required to keep the position open. At this point, your position is liquidated to prevent a negative balance and the potential for catastrophic losses. 

Trading with leverage amplifies both profits and losses which can lead to liquidation if the market rapidly turns against your position.

Liquidation waterfall

Once you open your position, it can be assigned to one of the five liquidation waterfall stages.

Stage

Details

Pre-liquidation

To prevent the position from being auto-liquidated, as it loses value as a result of adverse market moves, you must maintain a certain level of collateral in their account. 

Initial Margin > Current Margin > Maintenance Margin

Automatic Partial Liquidation

When your position loses value and the collateral in your account falls below the Maintenance Margin, but is still above the Close out Margin, the position will automatically partially liquidate the position to prevent further losses. 

Liquidity Support Program

Once your Current Margin is below the Close out Margin, your liquidated positions will be assigned to LSP participants who will take on the liquidated positions.

Insurance Fund

Positions with margin levels below Close out Margin are liquidated by the Insurance Fund when LSPs have no capacity to take liquidated positions. 

Auto-Deleveraging and Clawbacks

Residual risk is addressed by auto-deleveraging and clawbacks in this final stage of the liquidation waterfall. Auto-deleveraging and clawbacks match and auto-deleverage liquidated positions against opposing traders. 

Liquidation buffer calculation

The liquidation buffer percentage is calculated by looking at your current margin available in your international exchange account. It can be any value between 0% and 100%, and can go well above 100% if your international exchange account is over-collateralized with USDC. 

  • 0% is the maintenance margin

  • 100% is your portfolio initial margin

Close to liquidation

You’ll receive a banner notification in your Advanced Trading UI and an email cautioning you that you’re close to liquidation.

  • Percentage below 80%: Warning state

  • Percentage below 20%: Danger state

  • Percentage at 0%: Liquidation begins

Avoid liquidation

Improve your liquidation buffer by closing open orders, closing positions or adding margin.

Closing a position

In the Positions Blotter of any perpetual futures market page, select a position to place a market order and close the position.


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