Margin trading positions have specific collateral-to-debt ratios (positive balances to negative balances). To understand liquidations, we must first define what is a collateral ratio. The collateral ratio is the value of the user's deposits and positions divided by the value of their loans. If your collateral ratio gets too low and goes below Vortex’s liquidation threshold, your position will be liquidated. Upon liquidation, your collateral (aka margin) will be sold until your position is covered.

Liquidation Requests

The Vortex team is responsible for running bots that send liquidation requests for any account that is under margin calls. At launch, only these bots will be whitelisted to send liquidation requests. We will be opening liquidation to the public after launch. Upon receiving a liquidation request, Vortex will:

  1. Check if the account is in margin call and only proceed if so.

  2. Cancel all orders

  3. Check if the account is in margin call and only proceed if so.

  4. Freeze the account so that it won’t be liquidated again in the same block.

  5. Calculate how much margin excess each position can generate if liquidated, and sort positions by position value in descending order.

  6. Liquidate positions one by one until the account is no longer under margin call.

  • Liquidation Margin Ratio: The margin ratio of the user's account at which the user will get either partially or fully liquidated. The margin ratio is calculated by total collateral divided by the total sum of open positions.

Liquidation Price and Margin Ratio Calculation:

In normal conditions, our margin ratio calculation uses theoretical mark price after closing (Exit Price) to calculate total collateral and the notional sum of open positions (i.e. margin ratio) as the price that liquidations are based on. When oracle-mark divergence > 3%, the better of

  1. oracle with market slippage

  2. mark price after closing

will be used to value the position to prevent wrongful liquidations.

Last updated