Liquidations

Liquidation is the automatic closure of your position when your account equity falls below the required Maintenance Margin. It protects both you and the platform from negative balances.

Monitor your Margin Ratio actively. Once liquidation begins, you cannot add margin or cancel the process.

Liquidation triggers

Liquidation is the automatic closure of your position when your account equity falls below the required Maintenance Margin. This protects both you and the platform from negative balances.

Liquidation triggers

Margin modes	Trigger	Impact
Cross margin	Account Equity < Total Maintenance Margin	All cross positions may be liquidated together
Isolated margin	Position Margin < Position Maintenance Margin	Only the specific isolated position is liquidated

Cross margin

Account Equity < Total Maintenance

Component	Formula
Account Equity	Collateral + Unrealized PnL (all cross positions)
Total Maintenance Margin	Σ (Position Notional × MMR) for all cross positions
MMR	Maintenance Margin Rate — varies by tier (see Margin Tiers)

Isolated margin

Position Margin < Position Maintenance

Component	Formula
Position Margin	Isolated Collateral + Unrealized PnL (this position only)
Position Maintenance Margin	Position Notional × MMR

Liquidation Process

Step 1 — Trigger detection

The liquidation engine monitors all positions continuously. When equity falls below maintenance margin:

• The position is immediately marked for liquidation.

• No new orders can be placed on that position.

• Margin mode is locked — collateral cannot be transferred.

Step 2 — Cancel open orders

All open orders on the account are immediately cancelled.

Step 3 — Order submission

A single large IOC (Immediate-or-Cancel) order is submitted to reduce the position. The engine fills as much as possible and cancels the rest.

If the remaining margin is sufficient after this step (accounting for realized losses and liquidation fees), liquidation stops here.

Step 4 — Backstop liquidation

If margin is still insufficient after Step 3, the remaining position is closed at the bankruptcy price and transferred to the Liquidator Vault.

• Cross position backstop: The trader's cross positions and entire cross margin are transferred to the liquidator. If no isolated positions exist, the trader ends up with zero account equity.

• Isolated position backstop: Only that isolated position and its margin are transferred. Cross margin and other positions are untouched.

During backstop liquidation, the maintenance margin is not returned to the user — the Liquidator Vault requires this buffer to remain profitable on average.

The bankruptcy price is the mark price at which the trader's total loss equals their deposited collateral (or initial margin). At this point, the margin balance reaches zero.

To avoid losing maintenance margin, place stop-loss orders or exit positions before the mark price reaches your liquidation price.

Liquidator Vault

On most exchanges, backstop liquidation profits go to the exchange operator or privileged market makers. On TxFlow, all PnL from liquidations flows entirely to the community through the Protocol Vault.

Related Pages

Pages	Description
Mark Price and Oracle Price	Calculation of Mark Price and Oracle Price
Vault	Protocol vault does market making and liquidations and receives a portion of trading fees.