1.About Liquidation
DigiFinex uses mark price to avoid liquidation due to lack of liquidity or market manipulation.
1.1 liquidation price of isolated margin mode
Margin Rate = （ Position Margin + Unrealized Profit/Loss ）/（Maintenance Margin + Commission fees of forced liquidation）
When the margin rate of single isolated position is <= 100%, the account will trigger forced position reduction.
1.2 liquidation price of cross margin mode
cross margin account equity (excluding isolated margin mode margin, isolated margin mode unrealized profit and loss) <= cross margin net maintenance margin + Commission fees of forced liquidation,
Margin Rate = 【cross margin account equity (excluding isolated margin mode margin, isolated margin mode unrealized profit and loss)】/（Maintenance Margin + Commission fees of forced liquidation）
When the margin rate of single isolated position is <= 100%, the account will trigger forced position reduction.
1.3Liquidation Process for Future Trading
When liquidation happens, Digifinex uses laddered liquidation to reduce the required maintenance margin and avoid full liquidation. The liquidation process is as follows:
a. Cancel all active orders that will increase the position size of the respective trading pair while retaining the existing position to release additional margin.
b. The system will initially attempt to lower the risk limit tier to the minimum possible, aiming to decrease the maintenance margin rate necessary for the position, while keeping the position unaffected.If the risk limit tier is still not at the lowest level, the system will then partially close the position by submitting a Fill-Or-Kill (FOK) order of the difference between the current position value and the lower margin tier value to partially close the position.
c. If the position is still subject to liquidation (i.e. does not meet the required maintenance margin level), the position shall be taken over by the liquidation engine and closed at the bankruptcy price.
d. Processing of positions after takeover by the forcing engine:
-When a user's position is taken over by the forcing engine at the bankruptcy price, if the position can be executed in the market at a price better than the bankruptcy price, the remaining margin will be added to the insurance fund.
-If the insurance fund can’t cover the extra cost when the positions are closed at a worse price than the bankruptcy price, ADL will be triggered and counterparty’ positions will get deleveraged by profit and leverage priority.
ADL indicator represents the priority. When all light bars are on, your position is in the top percentile.Once you are de-leveraged, a notification will be sent to you and the open orders will be canceled, and you are free to reopen the position.
1.4 Calculation of forced liquidation price
a. isolated margin mode (assume 0 trading fee）
Position Margin + Unrealized Profit/Loss < = Maintenance Margin + Commission fees of forced liquidation
Formulas
-For Buy/Long:
Liquidation Price (Long) = Entry Price - [(Initial Margin - Maintenance Margin)/Net Position Size] - (Extra Margin Added/Contract Size)
-For Sell/Short:
Liquidation Price (Short) = Entry Price + [(Initial Margin - Maintenance Margin)/Net Position Size] + (Extra Margin Added/Contract Size)
Example :
a. isolated margin mode (assume 0 trading fee）
Trader A buys 10,000 BTCUSDT perpetual futures at 8000USDT (the mark price) with a starting leverage of 25x and a long position. (Assuming the position of 10,000 tickets is in the first tranche and the maintenance margin rate is 0.5%)
Maintenance Margin = 8000x10000x0.0001x0.5% = 40USDT.
Position Margin = 8000x10000x0.0001/25 = 320USDT.
Liquidation price = （40-320+8000x10000x0.0001）/（10000x0.0001）=7720
*In isolated margin mode, users can manually increase the margin of the position to widen the gap it has from the opening price. This will give them a better liquidation price. Hence, users can manually increase the margin to lower the risk of the position when the risk limit is high.
b. cross margin mode (assume 0 trading fee）
Position Margin + Unrealized Profit/Loss < = Maintenance Margin + Commission fees of forced liquidation
Formulas
Liquidation Price = (Average Short Position Opening Price * Short Position Quantity * Position size – Average Long Position Opening Price * Long Position Quantity * Position size – Cross Margin Position Maintenance Margin + (Wallet Balance – Position Margin in Isolated Margin Mode – Order Margin + Unrealized PNL of other futures positions in cross margin mode) / (Short Position Quantity * Position size – Long Position Quantity * Position size)
Trader A buys in 10,000 cont of BTCUSDT perpetual futures at 8,000 USDT with an initial leverage multiple of 25x, and their wallet balance is 500 USDT. Note that this is the user’s only long position in cross margin mode, and there are no other positions in isolated margin mode or pending orders. (Assume the position of the 10,000 cont. is in the 1st tier of risk limit with a maintenance margin of 0.5%.)
Position Maintenance Margin in Cross Margin Mode = 8,000 x 10,000 x 0.0001 x 0.5% = 40 USDT;
Forced Liquidation Price =（0 * 0 * 0.0001 – 8,000 x 10,000 x 0.0001 – 40 +（500 – 0 – 0 + 0））/（0 * 0.0001 – 10000 x 0.0001）= 7,540 USDT
*Different from isolated margin mode, the liquidation price in cross margin mode may change from time to time as the margin might be affected by positions of other trading pairs. In cross margin mode, the initial margin of every position is independent, but the margin is shared. The unrealized PNL of each position may affect cross margin account equity. When there are multiple cross margin positions in both long and short positions under the same futures, the liquidation price for the two positions will be the same.
2. About Risk Limit
In a highly volatile trading environment, a trader holding a large position with high leverage will likely incur the significant risk of deficit loss. If the insurance fund is depleted, the auto-deleveraging system may be triggered, creating additional risk for other traders. Therefore, the risk limit mechanism is applied to all trading accounts in Digifinex. The system uses a tiered margin model for risk control and the leverage multiple depends on the size of the position. The larger the position, the lower the available leverage multiple. Users may adjust the leverage multiple themselves. The initial margin rate is calculated based on the leverage multiple adjusted by the user.
2.1 Position Limit, Maximum Leverage, and Initial margin rate
Before opening a position, users are required to adjust the leverage multiple. If the user did not adjust the leverage, the Digifinex default leverage multiple of 20x will be applied. However, users can still adjust the multiple. The leverage multiple determines the position limit, where the higher the leverage multiple, the lower the position limit.
2.2 Maintenance margin rate
The maintenance margin rate is not calculated based on the user's adjusted leverage multiple, but the user's position size, which means that the maintenance margin rate is not affected by the leverage multiple. The system divides the position amount into several tiers according to the basic risk limit and incremental amount of the futures. Different maintenance margin rates are applied to different tiers, where the larger the position amount, the higher the maintenance margin rate. (For risk limit details of each futures trading pair, kindly check Risk Limit under Futures Information.)
The liquidation price is affected directly by the maintenance margin. Therefore, to avoid liquidation, we strongly recommend users to close their positions before the margin balance drops to the maintenance margin level.
Please note that under abnormal price fluctuations and volatile market conditions, the system will take additional measures to maintain market stability, including but not limited to:
-Adjustment of maximum leverage
-Adjustment of position limits for different tiers
-Adjustment of maintenance margin rate of different tiers
3. Examples of Risk Limit Mechanism
For detailed information, please check Risk Limit List of All Trading Pairs
Using BTCUSDT perpetual futures as an example:
| Tier | Maximum Leverage | Holding Positions | Maintenance Margin Rate | Maximum Amount（USDT） |
| 1 | 100 | 1.00% | 0.50% | 300,000 |
| 2 | 50 | 2.50% | 1.25% | 10,000,000 |
| 3 | 20 | 5.00% | 2.50% | 15,000,000 |
| 4 | 10 | 10.00% | 5.00% | 20,000,000 |
| 5 | 5 | 20.00% | 10.00% | 6,000,000 |
| 6 | 4 | 25.00% | 12.50% | 10,000,000 |
| 7 | 3 | 33.33% | 16.67% | 20,000,000 |
| 8 | 2 | 50.00% | 25.00% | 60,000,000 |
| 9 | 1 | 100.00% | 50.00% | 100,000,000 |
Assume the risk limit tiers for BTCUSDT perpetual futures are as shown above.(The figures shown are only an example. To find the actual figures, kindly refer to the risk limit tiers of respective futures.):
Leverage multiple determines the user’s position limit and maintenance margin rate
-When the leverage is adjusted to 100x, it corresponds to the 1st tier of risk limit. The user’s position limit at this time would be 400,000USDT. (including cont of futures the user is already holding and unfilled open orders). the user’s position's maintenance margin rate at this point is 0.5%.
-When the leverage is adjusted to 25x, it corresponds to the 2nd tier risk limit （20< leverage ≤50）. The user’s position limit at this time would be 600,000USDT. (including cont of futures the user is already holding and unfilled open orders).The Maintenance Margin is calculated based on the value of a trader's open positions at different notional value tiers.If it is below the 1st tier 400,000 USDT, the 1st tier maintenance margin rate of 0.5% will be used; if it is above 400,000 USDT, it will rise to the 2nd tier maintenance margin rate of 1.25%;
-If the user is in the second tranche and the number of positions held by the user is 420,000USDT and greater than 400,000USDT.t this point, if the user’s position is under liquidation risk, liquidation will be triggered. As it is in the higher tier, liquidation by tier will be activated. Position of 20,000 USDT will be liquidated first, lowering the amount of open positions to 40,000 USDT.This will lower the risk limit from the 2nd tier to 1st tier and the maintenance margin rate from 1.25 % to 0.5%. The condition of the remaining positions will be monitored and the remaining positions will be liquidated if they remain under liquidation risk. If not, the positions will be kept.
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