Once you open your position, your position can be assigned to one of the following stages of the liquidation waterfall:
Pre-Liquidation: To prevent the position from being auto-liquidated, as it loses value as a result of adverse market moves, a user must maintain a certain level of equity in their account.
Initial Margin > Current Margin > Maintenance Margin
Automatic Partial Liquidation: When a user’s position loses value and the equity in their account falls below the Maintenance Margin, but is still above the Close out Margin, the position will automatically partially liquidate the position to prevent further losses.
Liquidity Support Program: Once the user’s Current Margin is below the Close out Margin, the user’s liquidated positions will be assigned to LSP participants who will take on the liquidated positions.
Insurance Fund: Positions with margin levels below Close out Margin are liquidated by the Insurance Fund when LSPs have no capacity to take liquidated positions.
Auto-Deleveraging and Clawbacks: Residual risk is addressed by auto-deleveraging and clawbacks in this final stage of the liquidation waterfall. Auto-deleveraging and clawbacks match and auto-deleverage liquidated positions against opposing traders.