Liquidations

Notes:

1) Although CoinUnited 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.

4) None of this is investment advice.

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If an account's margin fraction falls below its maintenance margin, the account starts to be liquidated. Therefore, if its maintenance margin percentage is 5%, it would start to be liquidated once it reached 20x leverage. 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 market orders to close out the position 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 margin fraction falls below maintenance margin then:

All pending limit orders and stop orders will be cancelled.

With the restriction that the total value of liquidation orders is less than 0.0001 times the average daily volume of the underlying coin added across all liquidating positions, we send 10% of the position size as an order on the market every 5 seconds on average.

Approximately every 5 seconds, we send 10% of the position size as an order on the market, with the constraint that the total size of liquidation orders is less than 0.0001 times the average daily volume of the underlying coin summed across all liquidating positions.

Specifically:

Every 5 seconds:

1. Set order size to 10% of position size
2. Bound order notional from below by min($1000, 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 borrowed spot position tab you visit. If the product's 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 Requirement

Check the explanatory box on the right hand side again. Additionally, you can check your current margin fraction, which is basically 1/leverage, as well as the amount of leverage that is currently being employed. If your margin fraction falls below the maintenance margin requirement, which is also shown in the box, your account will start to be liquidated. Maintenance margin requirement starts at 5% and rises with position size (or lower depending on position size).Therefore, you will begin to be liquidated once your account reaches ~20x leveraged.

Please note that Total Notional Size 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. See here for further details.