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  • Liquidation engine
  • Liquidation fee
  1. Butter Perps
  2. Perpetuals Deep Dive
  3. Risk

Liquidations

PreviousMargin and collateralNextAuto deleveraging

Last updated 1 year ago

Positions will be liquidated when account value falls below the maintenance margin. Butter.xyz's liquidation engine performs partial liquidations until the account value is in compliance with margin requirements.

Liquidation engine

When a trader's account value falls below the maintenance margin, his account enters liquidation mode. The trader cannot place orders while his account is in liquidation mode.

Define collateral ratio=account valuemaintenance margin\text{collateral ratio} = \frac{\text{account value}}{\text{maintenance margin}}collateral ratio=maintenance marginaccount value​.

The liquidation engine will liquidate the trader's largest positions first, and it will continue to liquidate until the collateral ratio is at least 1.1. Small positions may be fully liquidated.

If a trader's account is at risk of incurring bad debt (negative account value), the trader's positions may be liquidated against profitable traders' positions. .

Liquidation fee

The liquidation fee is 2.5%.

Read more about auto deleveraging