Liquidations

A position whose equity at the risk price falls below its maintenance margin can be closed by any account. The account that does it is paid out of the liquidation fee.

Key figuresCopy Anchor Link

How it worksCopy Anchor Link

liquidate takes no price and no choice from the caller:

1. Accrue funding to now.
2. Read the market's price and step its risk price toward it.
3. Value the whole position at the risk price, on the closing side of the spread. If equity is not below maintenance, refuse.
4. Close the whole position at the worse of the risk price and the oracle for it: the lower for a long, the higher for a short.
5. Pay out what is left.

equity  = min(equity at close price, collateral + remaining budget)
fee     = min(size × liquidation_fee_bps, equity)
to owner      = equity - fee
to liquidator = fee - (20% + 10% + 10% of fee)

The trigger reads the risk price, so a reading the risk price has not had time to follow liquidates nobody. The close reads the worse of the two, so what the owner gets back is never priced off a risk price still catching up with a fall. See Price sources.

The fee comes out of the position's equity and never out of pool capital. A position already through zero pays no fee. On a backed market the liquidator still takes the whole 60%; backers get no part of a liquidation fee.

liquidate also works on a paused market. A pause stops new risk; it does not trap a position already through its margin.

Worked exampleCopy Anchor Link

A $5,000 long from $100 at 5x: $1,000 of collateral after the open fee, on a site listing (10% maintenance, so $500; 100 bps fee, so $50; 20 bps spread). Funding is left out, and the risk price has caught up with the oracle.

1. Risk price $90.30. Exit at the bid: about $90.12. PnL: $5,000 × (90.12 / 100 - 1) = -$494. Equity: $506. Not below $500. Healthy.
2. Risk price $89.90. Exit about $89.72. PnL -$514. Equity $486. Below $500. Liquidatable.
3. Fee: $50. Liquidator: $30. Pool keeps $20 (protocol $10, insurance $5, chain $5). Owner gets $436.

When the collateral is not enoughCopy Anchor Link

A liquidation can complete past zero equity. Equity is floored at zero: the position loses its collateral, pays no fee, and the pool books a smaller gain than the mark implied. Nothing is owed after that.

A liquidated position in profit is never paid past its collateral plus its market's remaining budget. See Profit haircuts.

Why anyone can liquidateCopy Anchor Link

A keeper cannot produce a better outcome than an arbitrary caller, since the instruction takes no input. A keeper that stops would prevent the outcome entirely. So liquidation, clearing and settlement are all permissionless. The worst a stalled crank can do is leave orders resting where their owners put them.

The venue's keeperCopy Anchor Link

Anyone may liquidate, but the venue runs a keeper so nobody has to.

1. It holds every open position in memory and checks each against the live price every 3 seconds.
2. It reads the full list from the chain every minute, and re-reads a wallet after any fill it settles or transaction it relays for it.
3. For every market with a position past its margin, it first sends step_risk_price, then tries the liquidation.
4. A position the program still finds healthy at the risk price is tried again on the next check. At 1.2% per step, a 6% move takes about five steps to reach.
5. A liquidation that fails for any other reason waits 30 seconds.

The mark keeper moves an observed mark at most 10% a push after holding a larger move for one pass, so a crash crosses each liquidation price on the way down instead of jumping past it.