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Introduction to Liquidation Protocol
Introduction to Liquidation Protocol

An overview of the liquidation protocol.

Updated over a week ago

Notes:

1) Although CoinUnited.io strives to lessen the possibility of clawbacks, they are still possible.

2) The liquidation price estimate is only a prediction. Several variables, including the performance of the contracts your account is a position in, the currency in which your collateral is denominated, and others, will determine when an account is truly liquidated.

3) US clients are not permitted to use CoinUnited.io.

4) None of this is investment advice.

If an account's Total Account Value falls below its Maintenance Margin (USD), the account starts to be liquidated. Users are unable to send orders on their accounts while they are under liquidation because the liquidation engine takes over.

The liquidation engine will then regularly place liquidation orders to close out the outstanding positions of the account. The liquidation engine's objective is to properly close down positions in the market with the minimum possible impact, maintaining orderly markets. Only standard market orders are sent on behalf of the account being liquidated by the liquidation engine.

Depending on the size of the position, the liquidation process will go at a different pace, but for small positions, it will attempt to completely liquidate the position in approximately one minute. The liquidation will cease if part of the account is liquidated and its leverage falls back below the cutoff.

Detailed steps:

If the account’s Total Account Value falls below its Maintenance Margin (USD) then:

All open orders will be cancelled.

Approximately every 2 seconds, we send 70% of the position size as an order on the market.

Specifically:

Every 2 seconds:

  1. Set order size to 70% of position size

  2. Bound order notional from below by min ($500,000, position size)

  3. Bound order size from above by max liquidation size remaining

  4. Multiply order size by uniform(0.85, 1.15)

  5. Bound order size from above by position size

  6. Decrease max liquidation size remaining by order size

  7. Unstake flexible if there is insufficient balance

How can I determine my liquidation risk?

There are two methods to know when your account would be liquidated.

#1: Estimated Liquidation Price

There will be an explanatory box on the right-hand side of the position tab you visit. If the market price reaches the estimated liquidation price, your position will begin to be liquidated if you do not own any other holdings.

#2: Maintenance Margin (USD)

Check the explanatory box on the right hand side again. If your Total Net USD Value falls below the Maintenance Margin (USD), which is also shown in the box, your account will start to be liquidated.

Please note that Total Account Value in this context refers to the total dollar value of all open positions in that account. Furthermore, keep in mind that estimated liquidation prices might be unintuitive, particularly if you own holdings in many different products. The actual price your account would be liquidated at may differ from your estimated liquidation price depending on the relative performance of the various positions you hold.

Keep in mind that we attempt to liquidate accounts gradually and that we will cease once the margin fraction of your account rises over maintenance, meaning that we might only need to liquidate a portion of your position.


Need More Help?

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