Please note that Cross Collateral Liquidation is a separate process and independent of any liquidation of leveraged positions. For more information around liquidations of leveraged positions, please see Liquidations. If a liquidation of Cross Collateral is triggered at the same time as a liquidation of leveraged positions, the leveraged positions will be liquidated first before moving on to the liquidation of Cross Collateral.
There are three scenarios that may trigger the liquidation of Cross Collateral:
Your Total Account Margin falls below zero
If your Total Account Margin falls below zero, EQONEX will cancel any outstanding open derivative orders, followed by any open spot buy orders. We will not cancel your open spot sell orders as they do not affect not your Total Account Margin. If the cancellation of open orders does not bring the Total Account Margin back above zero, EQONEX will begin to liquidate your Cross Collateral assets.
You have negative balances turned off and generate a negative USDC balance
If a loss-making position is closed, and/or a basis payment is incurred, and/or a fee was paid such that a negative USDC balance was generated and the Negative Balance feature is turned off, EQONEX will liquidate Cross Collateral assets to cover the negative USDC balance.
You have negative balances turned on and generate a negative USDC balance that exceeds the -10,000 USDC cap
If the negative balance has exceeded the cap of -10,000 USD, EQONEX will begin the liquidation of Cross Collateral assets to bring your USDC balance back below the -10,000 cap.
Any liquidation under Cross Collateral will be charged a fee of 37.5 bps. Trading fees are included in such liquidation fees.
Cross Collateral Zero Price
Cross Collateral Zero Price (CCZP) is the price at which the USDC balance would be zero by selling the Cross Collateral assets. The CCZP is adjusted for the Cross Collateral Liquidation fee to ensure sufficient USDC is generated to pay this fee upon liquidation.
Note that the Cross Collateral Zero Price is different from the Zero Price for leveraged positions. The Zero Price for leveraged positions is the point at which the Total Account Margin would be fully depleted by the closing of the leveraged position, not your Cross Collateral assets.
Only assets eligible for Cross Collateral are at risk of getting liquidated. That means that if you are holding both BTC and ETH, but ETH is not eligible to be used as Cross Collateral, only your BTC could get liquidated by EQONEX.
The amount of a Cross Collateral asset that gets liquidated depends on the scenario that triggered the liquidation. In all cases, EQONEX aims to preserve as much of your assets as possible. If you have negative balances turned off, we will liquidate only as much of your assets needed to bring your USDC balance back to zero. For example, if you generate a negative balance of -100 USDC (e.g. through realization of P&L), we will aim to bring your USDC balance back to 0 USDC by liquidating roughly 100 USDC worth of Cross Collateral assets.
In the other two cases, we will liquidate slightly more to act as a buffer against constant liquidations. The exact amount is based on the haircut of the Cross Collateral asset. For example, if you have exceeded the negative balance cap of -10,000 USDC and you are using BTC as Cross Collateral with a 20% haircut, we will aim to bring your USDC balance back to -8,000 (-10,000 + 10,000 * 20%).
In all cases, there is a minimum liquidation amount of 80 dollars. For example, if you have negative balances turned off, you have no USDC, and you pay a 5 dollar fee, your USDC balance would get to -5. EQONEX would then liquidate 80 dollars worth of collateral assets. If the total value of your Cross Collateral assets is less than 80 dollars, we will liquidate all assets eligible for Cross Collateral.
EQONEX aims to preserve as much of your Cross Collateral assets as possible. We calculate the liquidation amount based on the Mark Price. If your liquidation order cannot be filled near the Mark Price, that may mean that less USDC was generated than needed. If the liquidation condition is still met after the first liquidation order, the system will send liquidation orders until the liquidation trigger is no longer met. As a result, you may see multiple liquidation orders for Cross Collateral.
Liquidation of a Cross Collateral asset follows a similar process as the liquidation of leveraged positions, with each liquidation going through the following steps:
Step 1: Liquidation Platform
When an account needs to get liquidated, the risk engine first sends an order to our Liquidation Platform with a limit price based on the Cross Collateral Zero Price.
The Liquidation Platform prices can only be used to fill liquidation orders, never regular market orders. If the order can be filled in full, the position is liquidated at this price, and the liquidation is now complete.
If the Cross Collateral liquidation order is only partially filled, then the liquidation fee is only charged on the partial fill. Suppose the order was only partially filled, and the Cross Collateral liquidation trigger is no longer met. In that case, the liquidation process is stopped, and no further liquidation order will be sent.
Step 2: Main Order Book Liquidation
If the order could not be filled in full in the previous step, the remaining order size is sent to the main order book with the same Cross Collateral Zero Price limit. If the Main Order Book can absorb the remaining order size, then the liquidation is complete.
Step 3: Liquidation Reserve
If the liquidation condition is still met after the previous step, the position is transferred to the Cross Collateral Liquidation Reserve at the Cross Collateral Zero Price.
Contrary to the liquidation of leveraged positions (such as perpetual futures), there will never be any Auto Deleveraging (ADL) on Cross Collateral liquidations.
For further assistance or more information, please contact our Customer Support team via firstname.lastname@example.org or click on the chat widget at the bottom right-hand side of the EQONEX page.