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Liquidation
As mentioned, liquidations occur when a user's margin fraction nears or dips below the maintenance margin.
Remember: Vertex is a cross-margin trading platform. Your account's equity is spread (used) between all positions. Cross-margin provides traders with more flexibility and can help avoid unnecessary liquidations. However, it also means that all positions are liquidated at once.
There are two types of liquidations on Vertex: partial and full which are determined when liquidation bots call the clearinghouse contract.
Partial liquidations are when a given % of your positions are liquidated.
Full Liquidations mean all positions, including trades and LPs are fully liquidated.
The price at which liquidations occurs is based on market data from the Oracles.
The mechanism is autonomously handled by liquidation bots. The bots monitor a positions margin fraction and call the clearinghouse to activate liquidations. Anyone with an account on Vertex can call the contract liquidation function, given that the liquidated account is eligible for full or partial liquidation.
Our liquidation algorithm follows the equation:
Max. Liq. Fraction=1.5×Margin FractionMaint. Margin+1.75\text{Max. Liq. Fraction} = -1.5 \times \frac{\text{Margin Fraction}}{\text{Maint. Margin}} + 1.75
The maximum liquidation fraction is clamped between 0 and 1. A value of 0 means that you cannot be liquidated, while a value of 1 means full liquidation. With a default maintenance margin of 0.01 on Vertex Forex markets, this implies full liquidation at a margin fraction of 0.005.
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