1. Trigger of liquidation
To keep these positions open, traders are required to hold a percentage of the value of the position on the exchange, known as the Maintenance Margin percentage. Minimum Maintenance Margin Requirements can be reviewed on the Risk Limits. If you cannot fulfill your maintenance requirement, you will be liquidated.
CoinEx uses Fair Price Marking for the purpose of avoiding liquidation due to illiquid markets or manipulation. A liquidation will be triggered when the Fair price (or Mark price) is lower (Longs) or higher (Shorts) than the liquidation price.
Once triggered, the position will be liquidated by the liquidation engine at the bankruptcy price.
2. Calculation of Liquidation price and Bankruptcy price
Liquidation price = Avg. opening price / (1 + Initial margin rate - Maintenance margin rate) Bankruptcy price = Avg. opening price / (1 + Initial margin rate)
Liquidation price = Avg. opening price / (1 - Initial margin rate + Maintenance margin rate) Bankruptcy price = Avg. opening price / (1 - Initial margin rate)
(Cross Margin) Initial margin rate = (Balance + Initial margin) / Position value (Isolated Margin) Initial margin rate = 1/Leverage
3. Liquidation Alert
CoinEx will calculate the Risk Limits of all positions and send liquidation alerts to users via Email or SMS for notification.
(Cross Margin) Risk Limits = Maintenance margin / Position margin * 100%
(Isolated Margin) Risk Limits = Maintenance margin / (Balance +Position margin) * 100%
4. Liquidation Process
CoinEx employs a partial liquidation process involving automatic reduction of maintenance margin in an attempt to avoid a full liquidation of a trader’s position.
· Users on the Lowest Risk Limit tiers
Step 1: CoinEx cancels any open orders in the contract.
Step 2: If this adds balance and satisfies the maintenance margin requirement, the position will not be liquidated; Otherwise the position will be liquidated by the liquidation engine at the bankruptcy price.
· Users on Higher Risk Limit tiers
Step 1: Attempting to bring a user down to a Risk Limit associated with their open orders and current position.
Step 2: Cancelling any open orders and then attempting to bring a user down to a Risk Limit associated with their current position.
Step 3: Submitting a FillOrKill order with Risk Limits being decreased in descending order to avoid forced liquidation.
Step 4: If the position is still in liquidation then the entire position is taken over by the liquidation engine and a limit order to close the position is placed at the bankruptcy price.
5. System Gains and Losses
When a liquidation is triggered, CoinEx will liquidate the position at the bankruptcy price. If CoinEx is able to liquidate the position at better than the bankruptcy price, the additional funds will be added to the Insurance Fund.
If CoinEx is unable to liquidate the position at the bankruptcy price, CoinEx will spend the Insurance Funds on aggressing the position in the market in an attempt to close it. If this still does not close the liquidated order, this will then lead to an Auto-Deleveraging event.