Liquidation Rules for Futures Trading

1. Tiered Adjustment Factors

The tiered adjustment factors dynamically affect your margin ratio and liquidation risk. It changes according to your net position size and leverage level. Larger position sizes or higher leverage may be subject to a higher adjustment factor. The higher the adjustment factor, the greater the risk of forced liquidation.

 

2. Forced Liquidation

The margin ratio is the key indicator of position risk. When your margin ratio exceeds 100%, your position will be liquidated by the system. We recommend monitoring your margin ratio closely to avoid liquidation. HTX USDT-margined futures uses a tiered liquidation mechanism. Instead of liquidating your entire position at once, the system will attempt to reduce your position size step by step by lowering the adjustment factor level.

 

3. Insurance Fund

The insurance fund is set to cover traders' negative equity losses resulting from bankruptcy positions.

  • Contracts Supporting Isolated Margin Mode Only

Each contract that supports only the isolated margin mode has its own independent insurance fund. If EOSUSDT and TRXUSDT futures contracts only support the isolated margin mode, then the insurance fund (USDT) for EOSUSDT contracts and the insurance fund (USDT) for TRXUSDT contracts are independent of each other.

  • Contracts Supporting Both Cross and Isolated Margin Modes

All such contracts share one common insurance fund. Example: BTCUSDT, ETHUSDT, and LTCUSDT futures contracts, supporting both cross and isolated margin modes, share the same USDT insurance fund.

When a liquidation occurs, the system takes over the position and executes it in the market. Any profit generated from the liquidation process is added to the corresponding insurance fund. Under certain conditions, the system may transfer additional assets into the fund to strengthen it.

A small fee may be charged when the liquidation engine processes orders.

Use of the Insurance Fund: During settlement, if there are negative equity losses from failed liquidation orders, the insurance fund will be used first to cover them. If the fund is insufficient, the remaining losses will be handled through the auto-deleveraging (ADL) mechanism.

 

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