Trading Rules: Liquidation Process (Trading Account)
21 days ago · Updated on

Overview of Margin Modes

Zoomex's Trading Account supports two margin modes: Isolated Margin and Cross Margin. Each mode has distinct liquidation processes that are important for managing your trading risk. This article outlines these processes, helping you understand how your positions are liquidated under each margin mode.

In Isolated Margin mode, the liquidation risk of a position is assessed based on the margin allocated for each position. Liquidation is triggered when the Mark Price reaches the liquidation price.

In Cross Margin, the risk of a Trading Account is assessed using the Initial Margin Rate (IMR) and Maintenance Margin Rate (MMR) of all positions. Liquidation is triggered when MMR reaches 100%. 

 

Liquidation Process under Each Margin Mode in Trading Account

 

Isolated Margin

In Isolated Margin mode, each position is managed independently, with its own allocated margin. Liquidation occurs when the Mark Price reaches the position's liquidation price. Isolated margin mode supports both One-way and Hedge (USDT-Perp Only) modes. For more information on margin calculation methods, please refers to the Margin Calculation under Isolated Margin (Trading Account).

Liquidation Process

In Isolated Margin mode, liquidation will be triggered when the Mark Price hits the position’s Liquidation Price. Liquidation of one position will not affect the other position. 

When a position is at risk of liquidation, Zoomex uses a laddered approach to reduce the required maintenance margin and avoid full liquidation. Here's how it works:

If the Risk Limit Tier is at the Lowest Tier:

1. Cancel Active Orders: The system cancels all orders that would increase the position size, freeing up margin to help save the position.

2. Close Position: If the position still doesn't meet the maintenance margin requirement, it will be liquidated and closed at the bankruptcy price.

If the Risk Limit Tier is Above the Lowest Tier:

1. Cancel Active Orders: The system cancels all orders that would increase the position size, freeing up margin while keeping the position intact.

2. Partial Close: The system will partially close the position by submitting a Immediate-Or-Cancelled (IOC) order of the difference between the current position value and the lower margin tier value.

3. Close Position: If the position still doesn't meet the maintenance margin requirement, it will be liquidated and closed at the bankruptcy price.

 

Cross Margin

Cross Margin mode shares margin across all positions in all derivatives trading within the account. Liquidation is triggered when the account’s Maintenance Margin Rate (MMR) reaches 100%.

In Cross Margin mode, One-way mode and Hedge mode (only for USDT Perpetual) are supported. Both modes utilize the same formula to calculate the Account IM rate and Account MM rate. However, the formula for deriving the initial margin required for open positions differs between the two (2) modes. For more details, please refer to Margin Calculation under Cross Margin (Trading Account).

Liquidation Process

The liquidation process of the Trading Account under Cross Margin is as follows: 

  Margin Rate Level  

Account Initial Margin Rate

(IMR)

 ≥ (Selected Leverage − 1 / Selected Leverage ) Margin trading does not allow any borrowing.
≥100%
  • Active spot orders will be canceled, while orders from Derivatives Perpetual Trading will be retained.
  • New Derivatives orders that would occupy the margin, cannot be placed.
  • It is not allowed to place an order to buy lower conversion rate assets with higher ones.

Account Maintenance Margin Rate

(MMR)

 = 100%

Step 1: Cancel Active Orders
a) Derivatives: All orders that would increase position size will be canceled.
b) Spot: Cancel spot margin orders that involve liabilities or result in a loss of spot order value — specifically, orders that use higher-collateral-value assets to purchase lower-collateral-value assets.

Step 2: Automatic Repayment
If there is any outstanding debt in the Trading Account, the system will trigger automatic repayment according to the process outlined here.

Step 3: Cancel All Orders
All remaining orders across products will be canceled.

Step 4: Close Fully Hedged Positions (Hedge Mode)
This step applies only to fully hedged positions under Hedge Mode. Fully hedged positions will be settled at the mark price to release margin. If there are multiple fully hedged positions, the forced liquidation sequence will follow the contract liquidity order.

Step 5: Close Unhedged Positions
The system will calculate the margin amount required to bring the Maintenance Margin Ratio (MMR) down to ≤ 100%. Based on trading pair liquidity, positions will be selected according to liquidity priority to lower the risk limit level and release the required margin through forced liquidation.
≥ 160% The liquidation engine will take over the position, and the entire position will be forcibly liquidated.