Liquidations

If a position’s margin requirement is breached by hitting the position’s liquidation price, BLADE’s liquidation engine will take over the position with the goal of protecting counterparty interests.

Liquidation Process

Liquidations will be automatically processed in a step-by-step manner:

  1. Open orders for the contract will be canceled and the corresponding order margin will be added back to the trading wallet
    1. For cross positions, if enough margin is returned to the trading wallet to satisfy the position’s maintenance margin requirement, the liquidation process will stop. If not:
    2. For isolated positions, the liquidation process will proceed to the next step upon which:
  2. A limit order for the entire position will be placed at the bankruptcy price
    1. If the limit order is fully and immediately filled, the liquidation process will stop*. If not:
  3. A request will be sent to BLADE’s market makers who have the option of taking over all or a portion of the remaining position
    1. If the remaining position is fully assumed by market makers, the remaining resting limit orders will be canceled and the liquidation process will stop*
    2. If the remaining position is closed before the mark price reaches the bankruptcy price by a combination of market makers and resting limit order fills, any remaining resting limit orders will be canceled and the liquidation process will stop*
    3. If neither of the above occur, then:
  4. All remaining contracts will be terminated at the bankruptcy price
    1. Contract termination will begin with the highest levered profitable counterparties and will end once the remaining position has been fully closed

* If a position is liquidated at a price better than the bankruptcy price, any remaining maintenance margin will be forfeited and added to BLADE’s insurance fund.

Taker fees are always assessed to liquidated parties for filled orders, market maker position takeovers and contract terminations during liquidations.