Liquidation and Exchange Risk Systems

ADL Queue

An ADL queue is the ranking system a platform uses to determine which positions may be selected for auto deleveraging if ADL becomes necessary. The...

Auto Deleveraging (ADL)

Auto deleveraging, usually shortened to ADL, is a mechanism used by some derivatives platforms to reduce or close positions held by other traders w...

Bankruptcy Price

Bankruptcy price is a theoretical price level used in some leveraged trading systems at which the margin allocated to a position would be exhausted...

Estimated Liquidation Price

Estimated liquidation price is a platform's current estimate of the price at which a leveraged position would meet its liquidation conditions. The...

Forced Liquidation

Forced liquidation occurs when a trading platform takes action to reduce or close a leveraged position because it no longer satisfies required marg...

Insurance Fund

An insurance fund is a pool of assets maintained by some derivatives platforms to help absorb certain losses arising when liquidated positions cann...

Liquidation Buffer

Liquidation buffer describes the amount of room remaining between a position's current market conditions and its estimated liquidation point. It ma...

Liquidation Distance

Liquidation distance is the difference between the current or relevant position price and the estimated liquidation price. It is often expressed as...

Liquidation Engine

A liquidation engine is the system a leveraged trading platform uses to manage positions that breach its required margin conditions. Depending on t...

Liquidation Fee

A liquidation fee is a fee or charge associated with the liquidation of a leveraged position. How it is calculated and where the proceeds go depend...

Liquidation Price

The liquidation price is the estimated market level at which a leveraged position is expected to meet the conditions for liquidation under a tradin...

Liquidation Slippage

Liquidation slippage is the difference between the expected price of a liquidation transaction and the price at which it is actually executed becau...

Maintenance Margin Rate (MMR)

The maintenance margin rate, commonly shortened to MMR, is a rate used by a derivatives platform when calculating the minimum margin required to ma...

Negative Equity

Negative equity occurs when losses or obligations exceed the value available to support them under the relevant account or position calculation.

Partial Liquidation

Partial liquidation is a risk process in which a platform reduces part of a leveraged position rather than immediately closing the entire position....

Position Tier

A position tier is a risk category applied by some derivatives platforms based on the size of a trader's position or exposure. Different tiers can...

Risk Limit

A risk limit is a restriction or set of requirements a derivatives platform uses to control how much leveraged exposure a trader or position can ta...

Socialized Loss

A socialized loss is a loss allocation mechanism in which certain trading losses that cannot otherwise be covered are distributed among a wider gro...