BTCEX uses the Mark Price to avoid unnecessary liquidations and to combat market manipulation.
What is the difference between Mark Price and Last Price?
To avoid spikes and unnecessary liquidations during periods of high volatility, BTCEX Futures uses Last Price and Mark Price.
The last Price refers to the latest transaction price the contract was traded at. In other words, the last trade in the trading history defines the Last Price. It’s used for calculating your realized PnL (Profit and Loss).
On the other hand, Mark Price is calculated using a combination of funding data and a basket of price data from multiple spot exchanges. Your liquidation prices and unrealized PnL are calculated based on the Mark Price.
Risk and leverage are adjusted based on the user’s absolute exposure; the larger the position, the higher the required margin, and the lower the leverage. A liquidation is triggered when:
Collateral = Initial Collateral + Realized PnL + Unrealized PnL < Maintenance Margin
It is important to note that the maintenance margin change will directly affect the liquidation price. To avoid being liquidated (i.e. margin ratio hits 100%), please add more margin or reduce your positions. It is recommended to control the margin ratio below 80%.
Liquidation occurs when the Mark Price hits the liquidation price of a position. Traders are advised to pay close attention to the movements of the Mark Price and the liquidation price to avoid being liquidated.
BTCEX allows highly leveraged trading by using a sophisticated risk engine and liquidation model. The liquidation model might be intricate.
What happens during liquidation?
During the liquidation process, all open orders are immediately canceled. All users will be subjected to the same liquidation protocols referred to as “Smart Liquidation.” BTCEX takes full liquidation of a user’s position. For any traders that are cleared via forced liquidation and not by an order issued by the user, a liquidation fee will be charged on the amount liquidated.
It is important to mention that, as a general rule, users who hold small positions that enter liquidation are highly likely to be entirely liquidated. Users with larger accounts will see a smaller percentage of their accounts liquidated compared to smaller users. This is because the Maintenance Margin is based on a user’s position amount and not their leverage selection. As a result, the effective Maintenance Margin for smaller users is lower than the liquidation fee rate. As such, they are already bankrupt when first entering liquidation, regardless of the final price when clearing.
Note that all orders for liquidations are Immediate or Cancel orders. The order will fill as much as possible and cancel the rest.
The user’s position will be closed at the bankruptcy price, and the Insurance Fund will take over the position, and the user is declared bankrupt. A portion of the remaining collateral (if any) will go to the Insurance Fund. If an account becomes bankrupt (negative wallet balance), the Insurance Fund will payout to balance the account back to 0.
Automated Negative Balance Clearance
When a user’s account balance falls into negative equity, BTCEX will use the Insurance Fund to cover the deficit losses in the user’s account. The automated negative balance clearance will be performed every ten minutes.
Please note the negative account balances will be automatically cleared for users who meet all the requirements below:
- For negative balances in USDT-margined accounts, there are no open positions (cross or isolated) in the account.
- The user did not transfer him/herself to deficit losses in his/her account after liquidation.
In cases where you did not meet the criteria stated above, please contact our Customer Service agents for assistance.
Insurance Clear Fee
When a user's position is liquidated, a certain percentage of the Insurance Clear fee will be collected and contributed to Insurance Fund reserves, marked as ''Insurance Clear'' in the Transaction History.
Since the liquidation price will not change, it is recommended that users strictly control their position risks to avoid liquidation.
- The Insurance Fund will take over the liquidation positions at the bankruptcy prices, and the bankruptcy prices may be out of the contract’s market price range but the bankruptcy price will not show on the K-line.
- We will send margin call and liquidation call notifications by mail, text message, and internal message. The notifications serve as a risk warning and cannot guarantee timely delivery. You agree that during your use of the Service, under certain circumstances (including due to personal network congestion and poor network environment), users may be unable or delayed to receive SMS or e-mail reminders. BTCEX reserves the right with no obligation to deliver notifications.