Forced Liquidation

How to Calculate Liquidation Price

In Spikex's futures trading, we use the “mark price” to determine whether to trigger forced liquidation. Utilizing the mark price effectively prevents forced liquidations caused by insufficient liquidity or market manipulation. When the mark price reaches the liquidation price, forced liquidation will be triggered.

The liquidation price for contracts differs between Cross Margin Mode and Isolated Margin Mode. In Cross Margin Mode, all available margin serves as position margin. If you hold multiple positions, the unrealized P&L of each position affects your liquidation price. Funding rates received or paid impact margin amounts, thereby altering the liquidation price.

Liquidation and Position Levels

When your contract position's margin ratio reaches ≥ 100%, the system executes forced liquidation according to predetermined rules. The contract margin ratio calculation depends on your margin and unrealized P&L, while also considering factors like maintenance margin ratio and trading fees.

Isolated Mode: Position Margin + Unrealized P&L ≤ Maintenance Margin + Liquidation Fee, i.e., when the margin ratio = 100%, forced liquidation is triggered.

Cross Margin Mode: Cross Margin Account Equity (excluding Cross Margin, Cross Unrealized P&L, and all order margin) ≤ Cross Margin Maintenance + Liquidation Fee. Liquidation triggers when the margin ratio reaches 100%.

Forced Liquidation Process:

When forced liquidation is triggered, the system will gradually close positions step-by-step based on the risk level of the user's positions. This prevents all positions from being liquidated at once, helping users better manage risk.

1. Order Cancellation

- Full Position Mode: Cancel all unfilled pending orders under the account.

- Isolated Position Mode: If Auto-Margin Top-up is enabled, the system will cancel all pending orders for the current contract. If the margin ratio remains ≥100% after order cancellation, the system proceeds to the next step.

2. Long-Short Self-Liquidation

- For full positions holding both long and short directions, the system performs self-liquidation to reduce positions (applies only to full position mode). If the margin ratio remains ≥100% after self-liquidation, the process advances to the next step.

3. Stepwise Forced Liquidation

- If the position has already reached the lowest risk tier, the system will proceed directly to the next step.

- If the position remains above the lowest risk tier, the system will progressively reduce the position tier by liquidating portions at bankruptcy prices to lower risk until reaching the lowest tier. This process will continuously recalculate whether forced liquidation is triggered based on the new maintenance margin rate.

4. Full Liquidation

- If the position reaches the minimum tier and the margin ratio is greater than or equal to 100%, the system will liquidate the remaining position at the bankruptcy price.

- Since the forced liquidation process bypasses the order matching system, the bankruptcy price will not appear in market transaction records or candlestick charts.

Processing After the Forced Liquidation Engine Takes Over:

1. Executing at Prices Better Than Bankruptcy Price

- If positions can be liquidated at prices better than the bankruptcy price, the remaining margin will be transferred to the insurance fund.

2. Covering Margin Call Losses

- If positions cannot be liquidated at prices better than the bankruptcy price, the margin call losses will be covered by the insurance fund. If the insurance fund cannot cover the losses, the liquidated positions will be handled by the automatic position reduction system.