1.11 Parameter Assumptions
A futures face value;
N position size;
P1 Average entry price;
y: the maintenance margin rate;
x Margin balance increase.
n trading fee rate;
z Funding fee;
k Leverage;
P2 Forced liquidation price
P3 Bankruptcy price
1.12 Forced liquidation price
For long position: P2={A N*(1+n)}/ { (AN/ P1)*(1+ 1/k-y)+ x +z }
For short position: P2={A N*(1-n)}/ { (AN/ P1)*(1- 1/k+y)- x -z }
1.13 Bankruptcy Price
For long: P3={A N*(1+n)}/ { (AN/ P1)*(1+ 1/k)+ x +z }
For short: P3={A N*(1-n)}/ { (AN/ P1)*(1- 1/k)- x -z }
1.14 Forced Closure
When the mark price moves in the direction unfavorable to the user and inferior to the forced close price, the following operations are performed in sequence:
1. Prohibit the user from opening positions.
2. All open orders of the user are canceled.
3. If the mark price is still lower than the leveling price, the system will directly take over the user's position. The user's account will be zeroed out and the insurance fund will be used to cover the deficit.
1.15 ADL
After taking over the position, the system will consign the positions to the market at the bankruptcy price. If the positions can be traded, the remaining margin is credited to the Investor Protection Fund; if it cannot be traded, the “Automatic Position Reduction” program is activated.
If the forced position cannot be closed out in the market, the ADL
system will reduce the position of the investor who holds a position in the opposite direction. The order in which the positions are reduced will be determined by the leverage and profitability ratios.
1.16 Investor Protection Fund
If the system is able to close a position at a better price than the bankruptcy price, then the additional funds will be added to the Investor Protection Fund.
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