Understanding Forced Partial Liquidation
Forced partial liquidation is a risk control measure implemented by OKX to mitigate market impact and potential liquidation losses during large-position liquidations.
Detailed Rules for Forced Partial Liquidation
Trigger Conditions
When a user’s position tier is Level 3 or higher:- If the margin ratio falls below the current tier’s maintenance margin + liquidation fee rate but remains above the lowest tier’s maintenance margin + liquidation fee rate, the system will partially liquidate the position instead of full liquidation.
- The system calculates the number of contracts needed to reduce the position by two tiers and executes partial liquidation.
Post-Liquidation Check
- If the margin ratio meets the new tier’s requirements after liquidation, the process stops.
- If not, the system repeats the partial liquidation process.
Isolated Margin Mode
Process:
- The system places a forced partial liquidation order at a price slightly better than the latest transaction price.
- During liquidation, the position is frozen, and no operations are allowed.
Order Status Check (~1 minute later):
- If filled and the margin ratio is sufficient: Remaining orders are canceled.
- If unfilled or margin ratio remains insufficient: The order is canceled, and the process repeats at the current market price.
Cross Margin Mode
Single Position (Long/Short Only)
- Same process as Isolated Margin.
Hedged Positions (Long & Short)
The system offsets overlapping contracts and checks the margin ratio.
- If sufficient: Liquidation stops.
- If insufficient: Partial liquidation continues.
- The perpetual contract account is frozen during liquidation.
Full Liquidation Rules
When Full Liquidation Occurs
- For Tiers 1–2: If the margin ratio falls below the tier’s maintenance margin + liquidation fee rate.
- For Tier 3+: If the margin ratio falls below Tier 1’s maintenance margin + liquidation fee rate.
Process
- Positions are liquidated at the bankruptcy price (zero margin price) to prevent cascading liquidations and overlosses.
- Isolated Margin: Only the affected position is liquidated.
- Cross Margin: All positions under the contract are liquidated.
Risk Reserve Fund & Loss Allocation
Risk Reserve Fund
- Profits from liquidation are injected into the fund.
- If liquidation causes overloss, the fund covers it first.
Loss Allocation
If the fund cannot cover the loss, all profitable users from that day share the loss proportionally:
- Allocation ratio = (Overloss – Risk Reserve) / Total net profits of all profitable users.
- Deducted from users’ realized profits.
FAQs
Q1: What’s the difference between partial and full liquidation?
A: Partial liquidation reduces position size to avoid full closure, while full liquidation closes the entire position when margin is critically low.
Q2: Can I cancel a forced partial liquidation order?
A: No. During liquidation, the position/account is frozen until the process completes.
Q3: How is the bankruptcy price determined?
A: It’s the price at which your margin reaches zero, calculated to minimize market impact.
Q4: Who bears the loss if liquidation fails to cover debts?
A: Profitable users share the loss proportionally after Risk Reserve funds are exhausted.