Liquidation

Liquidations occur when the trigger condition is breached, and trades are executed at the liquidation price. The liquidation algorithm attempts to minimize the qty of positions closed by doing partial liquidations.

Trigger condition: maintenance margin >=100%. Maintenance margin is calculated by marking to market all positions using a very fast EMA of the mark price. The moving average ensures price stability and dampens the effect of sudden wicks.

Liquidation price: the quote price + a liquidation penalty. The platform-wide liquidation penalty on Omni is currently set to 0.5%. This means if you get liquidated, your order is force-closed at ask + 0.5% (for a short) or bid - 0.5% (for a long).

Technical Details

If auto-liquidation is set to true (which is the case for all settlement pools on Omni), then positions will start to be forcefully closed if the pool balance falls below the maintenance margin requirements. Remember that everything works on a per pool basis, and collateral in one pool cannot count for other pools.

Due to the nature of bilateral trading, a position being closed means it will be closed for both parties. The party whose balance has fallen below the maintenance margin requirement (and thus caused the liquidation) will be tagged as the taker, and the other party the maker.

The taker will incur a liquidation penalty, which is a pool parameter. For example, if the penalty is set to 0.005 , then the taker will buy to close at the ask price + 0.5%, and sell to close at the bid price - 0.5%.

For options (on Pro), the penalty will apply to the implied volatility. So options would be bought at an implied volatility 0.5% higher in our previous example.