ZB futures adopt partial forceDeleveraging as risk control measure to prevent large positions being force liquidation and causing significant losses as well as impacting the market price drop falls and trigger more unnecessary liquidation.
The force Deleveraging Mechanism can be seen as a buffer for force position closing, which does not close immediately when the margin rate corresponding to the position held by a large user is lower than the maintenance margin rate + transaction commission corresponding to the current position, but still higher than the maintenance margin rate + commission of the lowest position. The force deleveraging mechanism will calculate the number of positions differing from the next level of the position step by step and carry out partial position deleveraging. The margin rate after successful downshifting will be compared with the maintenance margin rate required for the corresponding position after downshifting again, and stop downshifting if it will not trigger force liquidation, and if the maintenance margin rate requirement for the new position is still not met, the force liquidation will continue to be cycled.
Example: Take BTCUSDT contract as an example, if the user's position gear is above 3 gears, when the force liquidation engine detects that the user's current margin rate is less than the required maintenance margin rate + commission for 3 gears, it will not immediately close all the positions, but partial deleveraging. In other words, it will calculate the number of positions to be reduced to 2, and then recalculate whether the user's margin rate meets the 2 maintenance margin rate + commission. If it does not, the reduction will continue to the lowest level, and if it does, the reduction will stop.
When the user's position is in the lowest gear, if the margin rate is lower than the maintenance margin rate + commission required for the current gear, or if the user's position is higher than the lowest gear, but the margin rate is lower than the maintenance margin rate + commission required for the lowest gear, it will trigger the force liquidation, and the position will be taken over by the force liquidation engine at the force liquidation price. The ZB force Liquidation Engine operates primarily to avoid the sharp fluctuations in cryptocurrencies that lead to serial force liquidation and the loss of penetration caused by usersinability to close their positions.
Example: In the above example, the user's initial position is in 3 gear, after triggering the force deleveraging to the lowest gear, the force liquidation engine continues to reduce the position if it is found that the current margin rate at the lowest gear is less than the lowest gear maintenance margin rate + commission, it is no longer possible to continue to reduce the position to lower the gear, then the force liquidation is triggered at this time, and the user's entire position is force liquidated.
Auto-Deleveraging (ADL) is the final step taken only when the Insurance Fund cannot accept the bankrupt client’s positions. ZB futures takes every possible step to avoid auto-deleveraging, and has several features such as FOK (Fill-Or-Kill)Orders to minimize the potential impact of any auto-deleveraging when it does occur. Unfortunately, due to the volatility in the crypto markets, and the high leverage offered to users, it is not possible to fully avoid auto-deleverage liquidations. In order to provide the best possible user experience, we are striving to keep auto-deleveraging liquidations to an absolute minimum.
The trader’s position in the priority ranking is calculated by both profit and leverage;More profitable and higher leveraged traders will be liquidated first. Specifically, traders will be ranked by their margin ratio and unrealized PnL as a percentage of their collateral. traders at imminent risk of being automatically liquidated will see the appropriate indicator in their interface. If the liquidation occurs, the trader will be sent a notice with the amount and liquidation price. The trader’s positions will be closed out at the bankruptcy price of the initial liquidated order. Any open orders will be canceled. Once the liquidation process is completed, the trader will be able to re-enter immediately.