Liquidation Mechanism

[Estimated reading time: 3 minutes]

When the risk level of an account or a position reaches the liquidation threshold set by the exchange, the system initiates liquidation, closing part or all of the position to prevent losses from exceeding the available margin and to protect users and the platform. This article explains the liquidation triggers, process, and price calculations, with a particular focus on the differences among cross margin under UTA, cross margin under classic account, multi-asset margin for USDT-M Futures, and isolated margin.

1. Understand the four account and margin modes

How liquidation is triggered, what is liquidated, and how broadly it affects your assets depend on your account and margin mode. The key distinction is simple: The first three modes assess risk at the account level, while isolated margin assesses each position independently at the position level.

2. Liquidation is triggered by mark price, not last traded price

Liquidation is always determined based on the mark price, not the last traded price. This helps filter out temporary price spikes on a single platform and reduces the risk of erroneous liquidations caused by isolated abnormal prices.

Note: Whether your position is liquidated depends on whether the mark price reaches the liquidation price, not the latest execution price. You can view the real-time mark price on the futures market page.

3. How risk is measured: Account level vs. position level

Account level: cross margin under UTA, cross margin under classic account, and multi-asset margin for USDT-M Futures. The system assesses all positions and margin within the applicable scope as a whole and uses the account maintenance margin rate to measure account risk. As long as the account has sufficient overall margin, a single position with an unrealized loss will not be liquidated independently. If overall account risk becomes too high, however, the system will take action at the account level.

Position level: isolated margin. Each isolated margin position uses its own allocated margin and is assessed independently based on its position maintenance margin rate. If a position reaches the liquidation threshold, only that position is liquidated. Other positions and assets in the account remain unaffected. You can also add margin to an individual isolated margin position to lower its liquidation price.

Using UTA as an example, the system checks account risk every second, with an additional check during settlement. Four metrics are used to determine account status, with key thresholds at 100% and 160%:initial margin rate (IMR), maintenance margin rate (MMR), worst-tier maintenance margin rate (MMR'), and adjusted equity (balance + unrealized PnL). A higher value indicates greater risk:

Note: Cross margin under classic account and multi-asset margin for USDT-M Futures follow the same general sequence: restrict position opening → deleverage → take over remaining positions for liquidation. Both assess risk based on the account maintenance margin rate, while isolated margin uses the maintenance margin rate of each individual position. Specific thresholds and maintenance margin tiers vary by mode and futures. Refer to the risk limit page for the applicable futures. For detailed definitions of these metrics, see Margin and Risk Metrics Explained.

4. Liquidation process: A tiered approach

Liquidation does not necessarily close all positions at once. Instead, the system follows a tiered, step-by-step process. Risk is reassessed after each step. Once account or position risk returns to a safe range, the process stops immediately. As a result, liquidation may only reduce part of a position or some positions rather than closing everything. The process consists of three steps:

Step 1: Cancel open orders. When risk increases and margin usage exceeds the applicable limit, the system first cancels futures open orders that would increase margin usage and prevents new positions from being opened. This limits any further increase in risk exposure.

Step 2: Tiered deleveraging. If risk remains elevated after open orders are canceled, the system reduces positions tier by tier based on a predefined algorithm. Deleveraging is executed using IOC limit orders submitted to the market. For buy orders, the order price will not exceed the lower of mark price × (1 + limit-price ratio) and the bankruptcy price. For sell orders, the order price will not be lower than the higher of mark price × (1 − limit-price ratio) and the bankruptcy price. Orders are placed at intervals of approximately 0.5 seconds, with risk reassessed after each order. The process stops as soon as risk returns to a safe level. The assets and positions handled at this stage vary by mode:

• Cross margin under UTA: The system first repays outstanding account liabilities, then converts positive-balance margin assets, and finally reduces futures positions tier by tier. A conversion fee applies when positive assets are converted.

• Cross margin under classic account / multi-asset margin for USDT-M Futures: The system directly reduces futures positions tier by tier. Classic futures accounts do not involve the repayment of borrowing liabilities or conversion of spot assets.

• Isolated margin: Only the position that triggered liquidation is reduced or closed. Other positions and assets in the account are not affected.

Step 3: System takeover and liquidation. If risk reaches the liquidation threshold (such as when a UTA's MMR reaches 160% or adjusted equity falls to 0 or below), the system freezes the account or affected position(s) and takes over the remaining position(s), which are then liquidated against the insurance fund account at the bankruptcy price. No additional takeover fee is charged. If, under extreme market conditions, losses still exceed the available margin after takeover at the bankruptcy price, the insurance fund for the corresponding futures will cover the shortfall.

5. Comparing liquidation across the four modes

6. How the liquidation price is calculated

The liquidation price (estimated liquidation price) is the price estimated by the system based on your current margin, maintenance margin requirements, and position direction. Liquidation is triggered when the mark price reaches this level. For a long position, liquidation is triggered when the mark price falls to the liquidation price. For a short position, liquidation is triggered when the mark price rises to the liquidation price. The estimated liquidation price changes as you open or close positions, add or remove margin, or incur changes in PnL. Refer to the real-time estimated liquidation price displayed on the trading page.

(1) Account level: cross margin in UTA, cross margin in classic account, multi-asset margin for USDT-M Futures: The liquidation price is an account-level reference price that changes based on all positions and margin within the applicable account scope. Increasing or reducing any position, or adding margin, may affect it.

(2) Isolated margin: The liquidation price is calculated independently for each position and depends only on that position's margin, leverage, and maintenance margin rate. Other positions do not affect it.

(3) Liquidation price vs. bankruptcy price:

• Liquidation price: The price at which liquidation is triggered. When the mark price reaches this level, the position enters the liquidation process. The liquidation price may appear on the mark price candlestick chart.

• Bankruptcy price: The price at which the position is taken over by the insurance fund account. It corresponds to the point at which the account's adjusted equity falls to zero. As a result, the bankruptcy price generally does not appear on the candlestick chart and is typically less favorable than the liquidation price.

Liquidation price

Bankruptcy price

The bankruptcy price is the price at which losses fully deplete the margin allocated to the position. It is also the reference execution price used when the system takes over a position for liquidation. The system intervenes earlier, when the mark price reaches the liquidation price, leaving a buffer before the bankruptcy price is reached. Under isolated margin, the maximum loss is generally limited to the margin allocated to that position and does not affect other assets in the account.

Bankruptcy price = [current futures mark price − position direction × adjusted account equity × (current futures MM ÷ account MM) ÷ USD index price of the quote currency ÷ current futures position size] ÷ (1 − position direction × taker fee rate). For long positions, round up to the nearest valid tick size. For short positions, round down to the nearest valid tick size.

• Long: position direction = 1

• Short: position direction = –1

Note: The bankruptcy price does not appear on the candlestick chart and may be higher or lower than the current market price. This is because it represents the price at which the applicable margin is fully depleted after liquidation. It is therefore less favorable than the liquidation price.

7. Liquidation notifications

When liquidation-related actions are triggered, the system sends notifications through the following channels so you can add margin or reduce your position in time: