Liquidations

When a position is liquidatable#

After funding is applied, the engine compares position equity with the maintenance threshold for its leverage tier. A position is eligible when equity no longer covers that threshold.

1× positions are protected from normal price liquidation by fully funded endpoint loss cover. They can still close when funding exhausts their remaining equity.

Normal liquidation#

1. 01
   Cancel resting orders

   Dormant maker exposure is removed before closing the position.

2. 02
   Execute FOK

   The router closes across the same order book + LP path used by traders.

3. 03
   Charge the close fee

   The normal 25 bps taker close fee applies.

4. 04
   Return residual collateral

   Any remaining value after PnL, funding and fee returns to the account.

Deep-loss backstop#

If equity falls below two-thirds of the normal maintenance threshold, the LP backstop may close the position directly. Residual collateral remains with the vault in exchange for absorbing tail loss and potential bad debt.