1. What Is Forced Liquidation?

2. What Are the Prerequisites of Forced Liquidation? What Is the Liquidation Process?

For BingX perpetual futures, liquidation is triggered based on the risk. When the risk of a futures position reaches or exceeds 100%, it will trigger either partial reduction or full liquidation.

1. Risk

• Isolated-Margin Mode Risk = (The maintenance margin of the isolated margin position + position closing fee) / (position margin + unrealized PnL)
• Cross-Margin Mode Risk = (The combined maintenance margin of all cross-margin positions + position closing fees of all cross-margin positions) / (balance - all margins used in isolated-margin positions - frozen assets + all unrealized PnL of cross-margin positions)

2. Liquidation Process

2.1 Isolated Margin Mode

1. The position will be frozen and the user will not be able to increase/reduce position margin, place orders, etc.
2. The system calculates a bankruptcy price and liquidates positions one by one based on this price.

2.2 Cross Margin Mode

1. The corresponding margin account will be frozen and the user will not be able to deposit, withdraw, transfer, place orders, cancel orders, etc.
2. The forced liquidation process will stop if the risk is < 100% after canceling all pending orders under the margin account of the particular currency.
3. The forced liquidation process will stop if the risk is < 100% after long and short positions of the same currency under the margin account are closed to offset with each other at market price.
4. If the risk is still ≥100% after the executions of the above, the system will liquidate the cross margin positions one by one based on the bankruptcy price in the order of unrealized PnL (i.e., the position with the greatest loss will be liquidated first) until the risk is < 100% or all cross margin positions are liquidated.

3. Estimated Liquidation Price

3.1 Isolated Margin Mode

3.1.1 Estimated Liquidation Price of the Same Position in Different Directions

3.1.2 Reasons for Changes in Estimated Liquidation Prices

• The user adjusts (increases or reduces) the margin for the open position.
• The settlement of funding fees (including paying or collecting funding fees).

3.2 Cross Margin Mode

3.2.1 Estimated Liquidation Price of the Same Position in Different Directions

3.2.2 Reasons for Changes in Estimated Liquidation Prices

• Other positions experiencing changes in collateral due to unrealized PnL caused by price fluctuations.
• Opening additional positions occupying account funds.
• Transferring funds into or out of the account.
• Deductions of trading fees incurred from opening and closing positions.
• Settling of funding fees (including paying or collecting funding fees).

4. Bankruptcy Price

5. Insurance Fund

1. How it is sourced: When the system liquidates a user's position, it will take over that position at the bankruptcy price. If the execution price when the position is being processed is more favorable than the bankruptcy price, the surplus generated from the liquidation will be transferred to the insurance fund.

2. How it is used: When the system liquidates a position, it takes over at the bankruptcy price and processes the position on the market. If the execution price is less favorable or the position cannot be executed, the insurance fund steps in to cover any shortfall. When the insurance fund is insufficient or rapidly depleted, auto-deleveraging (ADL) will be triggered.

6.USDⓢ-M FuturesForced Liquidation Illustration

6.1 Liquidation Price Calculation in Isolated Margin Mode

6.2 Example of Forced Liquidation in Isolated Margin Mode

• Initial Margin = Average Position Price × Size / Leverage = 1,000 × 10 / 10 = 1,000
• Unrealized PnL = (Market Price - Average Position Price) × Size = (904 - 1,000) × 10 = -960
• Risk = (The Maintenance Margin of the Isolated Margin Position + Position Closing Fee) / (Position Margin + Unrealized PnL) = (904 × 10 × 0.4% + 904 × 10 × 0.05%) / (1,000 - 960) = 101.70%

• Realized PnL = (Bankruptcy Price - Average Position Price) × Size = (900.4502251 - 1,000) × 10 = -995.4977489
• Position closing fee = Bankruptcy price × size × trading fee rate = 900.4502251 × 10 × 0.05% = 4.502251126

• Surplus = (Execution Price - Bankruptcy Price) × Size = (902 - 900.4502251) × 10 = 15.497749
• Deficit = (Execution Price - Bankruptcy Price) × Size = (900 - 900.4502251) × 10 = -4.502251

6.3 Forced Liquidation in Cross Margin Mode Price Calculation

Liquidation Price Calculation in Cross Margin Mode

Assume a user has a 5,000 USDT account balance. They open a long position of 2 BTC at a price of 10,000 USDT/BTC with 10x leverage. The maintenance margin rate is 0.5%, and the maintenance amount is 0.

Maintenance Margin = Price × Position Size × Maintenance Margin Rate - Maintenance Amount

= 10000 × 2 × 0.5% - 0 = 100 USDT

Calculating the liquidation price begins with identifying the current sustainable loss.

Total Sustainable Loss = Available Balance - Maintenance Margin

= 5,000 - 100 = 4,900 USDT

If the total sustainable loss is 4,900 USDT, the position can withstand a price drop of 2,450 USDT (4,900 / 2). Therefore, the liquidation price for the position is 7,550 USDT (10,000 - 2,450).

6.4 Example of Forced Liquidation in Cross Margin Mode

• Balance = Deposits - Withdrawals + All Realized PnL + All Funding Fees - All Trading Fees = 5,000 - 0 + 0 + 0 - (10,000 × 2 × 0.05% + 1,000 × 10 × 0.05%) = 4,985
• BTC Unrealized PnL = (Market Price - Average Position Price) × Position Size = (8,004 - 10,000) × 2 = -3,992
• ETH Unrealized PnL = (Market Price - Average Position Price) × Position Size = (912 - 1,000) × 10 = -880
• Position Risk Under Cross-Margin Mode = (Combined Maintenance Margin of All Cross-Margin Positions + Position Closing Fees of All Cross-Margin Positions) / (Balance - All Margins Used in Isolated-Margin Positions - Frozen Assets + All Unrealized PnL of Cross-Margin Positions) = [(8,004 × 2 × 0.4% + 912 × 10 × 0.4%) + (8,004 × 2 × 0.05% + 912 × 10 × 0.05%)] / (4,985 - 0 - 0 - 3,992 - 880) = 100.07%