Liquidation 🏜
Liquidation mechanism is an important part in sustainable derivatives trading experience. Read on to learn more!
Liquidation happens when a trader has insufficient funds to keep a leveraged trade open. You can read more about the liquidation process in the Futures section.
To tackle the issue with liquidation a liquidation mechanism is implemented. The liquidation mechanism allows executing the liquidation of vaults using price feed on the collateral.
The liquidation process is designed simply and transparently, where all positions available for liquidation are listed in a dedicated section of the RiskSwap platform. Positions are sorted based on their margin ratio: the smaller the margin ratio the closer is the position to the liquidation.
Just like any other RiskSwap platform participant, Market Maker (MM) can also participate in the liquidations.
To briefly describe what MM is: MM is a fully automated and algorithm-based trading program that channels and maintains liquidity and takes an active part in the liquidation schema.
Importantly, RiskSwap incentivizes liquidators to partake in the liquidation process as often as possible by rewarding them with liquidator fees.
Last modified 24d ago
Copy link