Liquidation Order Processing Method

To improve the execution speed of liquidation orders in perpetual contracts, BTCC has implemented the following processing methods without affecting market liquidity:

I. Terminology Explanation

1. Liquidation Price: The price at which the mark price reaches a certain value, and the user's margin ratio becomes too low, triggering liquidation. The platform gains ownership of the remaining position.
   
   
2. Bankruptcy Price: The price at which the user's margin ratio losses reach 0.
   
   
3. Liquidation Order Price: The price at which the liquidation engine places an order in the market after taking over the user's liquidated position.
   
   
4. Liquidation Execution Price: The actual price at which the liquidation order is executed in the market after being placed.
   
   

II. Liquidation Order Price Algorithm

1. Objective:
   To consider various factors, including contract market depth, basis, and mark price, in order to place liquidation orders at more reasonable prices. This aims to reduce the market impact of liquidation orders placed at bankruptcy prices, accelerate execution speed, and mitigate system risks.
   
   
2. Detailed Logic:
   When a user's position triggers liquidation and is taken over by the liquidation engine, the order will no longer be simply placed at the bankruptcy price. Instead, it will take into account the current contract market depth, basis, and mark price to calculate a price that can be executed as quickly as possible and maximize the liquidation surplus, which will then be placed in the market.
   
   

III. Liquidation Order and Bankruptcy Loss Inquiry

1. During the price modification process, some liquidation orders may be executed at prices lower than the bankruptcy price (for long positions) or higher than the bankruptcy price (for short positions). However, since the platform takes over the position’s ownership, any bankruptcy losses or profits between the bankruptcy price and the execution price will initially be borne by the platform.
   
   
2. The bankruptcy loss caused by the modification of liquidation orders will be deducted from the risk reserves at settlement to compensate the platform.