Liquidation Mechanism

In the event that the collateral amount is not enough to cover the client’s position, the position will be partially or fully liquidated. ZUBR constantly calculates the liquidation price of clients’ positions for all the instruments, the amount of funds on their accounts, and applicable margin mode (Cross Margin or Isolated Margin) are taken into account. 

The liquidation is triggered when the Mark Price crosses the Liquidation Price. This crossing shall be the moment when the client’s margin level is not enough to cover the client’s position. 

ZUBR applies full and partial liquidation regimes. The full liquidation of a client’s position occurs if there is a significant price movement against the client and the Margin Level goes below the Full Liquidation Margin Level (FLML). What is more, the full liquidation may also happen if there is no point in splitting the client’s position into fractions due to its small size.

In the event of the partial liquidation, at least 20% of the client’s position may be liquidated; however, it cannot be liquidated in full. The goal is to allow the client to hold a portion of the position with the margin level above the Partial Liquidation Margin Level.

The liquidation levels are linked to the Risk Limit which can be determined by the desired maximum position for a particular instrument. For more details, please check out the Margin page.

When the partial liquidation is triggered, the exchange core cancels any outstanding orders of the client to reduce its portfolio leverage. If this does not help, full liquidation of the client’s portfolio is activated.

The client may choose between the Cross Margin or the Isolated Margin modes. In the Cross Margin mode, liquidation is only triggered when the client’s margin level is not enough to cover all the open positions. In the Isolated Margin mode, liquidation occurs only when the client’s margin level for a particular position can not be maintained. Further, in the Isolated Margin mode, only the full liquidation can take place. If the margin level for the position reaches the FLML, this position will be liquidated in full.

The price received in the case of position liquidation is different from the Mark Price and the Market Price at the moment. To define the Liquidation Price (P Liq) the Mark Price (P MARK ) is adjusted by the client’s FLML as per the formula below.

The above calculation of the Liquidation Price guarantees that the client's balance would not go to negative territory.