If the margin of a position is lower than the maintenance margin, the trader will get liquidated. The fee of which is 0.075%.
Liquidation might result in the loss of margin, but 50% of the rest of the margin will be returned to the user while the other 50% will be added to the Contract Trading Risk Fund.
There are two types: Liquidation and Bankrupt Deleveraging. If the Bankrupt Deleveraging is triggered, the margin will not be returned.
1. Liquidation Process
Hoo employs a partial liquidation process involving automatic reduction of maintenance margin in an attempt to avoid a full liquidation of a trader’s position. When the trader is facing liquidation, the position will be taken over by risk control and liquidate for the trader at a fair price.
If the trader’s assets is higher than the maintenance margin after partial liquidation, the risk control engine will stop the liquidation process.
If the trader’s position is in an isolated margin mode when the position being taken over, the trader cannot do anything else except adding more assets to his position. If it is in a cross margin mode, the trader cannot do anything else to the contract that has the same margin except transferring assets to his contract account.
When the liquidation is completed, Hoo will return the 50% of the rest of the maintenance margin to the trader.
If the position wasn’t closed at the market price, and when the mark price reaches the bankrupt price which it is possible for Hoo to close the position for the trader at the liquidation price, auto-deleveraging will happen. The auto-deleveraging will deleverage the position of the trader and he will face bankrupt liquidation. At this point, the position of the trader will be deleveraged at a price lower than the liquidation price. The margin will be cleared and none will be returned to the trader.
Thus, the returnable margin range is [0, (Minimum Maintenance Margin - Closing Fees)*50%]
If a trader buys long 100 BTC-USDT contracts at a price of $7870.5 with 50x leverage, the liquidation price is $7752.4 and the minimum maintenance margin is $39.35.
So when the position gets liquidated at $7752.4, the fees that the traders has to pay is 7753.4*0.075%*100*0.01=5.81
When the trader is liquidated, his returnable maintenance margin ranges from [0, (39.35-5.81)*50%].
The specific refund amount is subject to the actual situation.
Please be noted that since Hoo employs mark price to trigger the liquidation, when the mark price reaches the liquidation price, the final price will be different from the theoretical liquidation price.
Jan. 10, 2020