Explanation of the Forced Liquidation Execution Mechanism

I. What Is Forced Liquidation?

When the risk ratio of your position reaches the system's liquidation threshold and the Mark Price touches your liquidation price, the system will automatically initiate Forced Liquidation (Liquidation) to prevent further losses to your account.

The purpose of forced liquidation is to reduce position risk as quickly as possible, not to guarantee execution at any specific price. Therefore, the liquidation trigger price is not the same as the final execution price.

II. Forced Liquidation Process

A complete forced liquidation generally follows the steps below:

1. Mark Price Reaches the Liquidation Price

• The system detects that your position has met the liquidation conditions.
• The forced liquidation process is immediately initiated.

2. Position Is Taken Over by the System

• The position is taken over by the platform's risk engine.
• The user can no longer cancel, modify, or continue holding the position.

3. Execution at Market Price

• The system submits a liquidation order to the market.
• The execution price is entirely determined by the available liquidity in the order book at that moment.

4. Completion of Execution

• Once the entire position has been filled, the liquidation process is completed.
• The system calculates all execution prices and displays the final average execution price.

III. Why Is the Actual Execution Price Different from the Liquidation Price?

The liquidation price is only the trigger price for initiating forced liquidation.

Once liquidation begins, the order must be matched in the market. Therefore, the final execution price may differ from the liquidation trigger price.

The main reasons include:

1. Insufficient Market Liquidity

The available orders in the order book may be limited.

If there is insufficient quantity at the best available price to fully execute your position, the system will continue matching orders at the next available price levels.

For example:

Assume you need to sell 2 BTC:

• The first 0.5 BTC is executed at 89,555
• The next 0.8 BTC is executed at 89,500
• The remaining 0.7 BTC is executed at 89,430

As a result, the final average execution price will be lower than 89,555.

2. Large Position Executed in Multiple Orders

If your position size is relatively large, the market may not be able to absorb the entire quantity at a single price level.

The system will automatically split the liquidation order into multiple executions, for example:

• Execution 1: 89,530
• Execution 2: 89,480
• Execution 3: 89,410

The final displayed execution price is the weighted average price calculated from all execution records.

3. Rapid Market Volatility

During periods of significant market volatility, prices may change within milliseconds.

By the time the system submits the liquidation order, the market price may already have moved. As a result, the final execution price may be either higher or lower than the liquidation trigger price.

This is a normal market phenomenon.

4. Slippage

Slippage refers to the difference between the expected execution price and the actual execution price.

Slippage may occur due to:

• Insufficient market depth
• High market volatility
• Large orders executed at market price
• Rapid changes in bid and ask prices

Slippage may be either positive or negative and does not represent an additional fee charged by the platform.

IV. Why Is My Liquidation Executed in Multiple Trades?

The system always prioritizes execution at the best available prices in the order book.

If the available quantity at the best price is insufficient to fully liquidate your position, the system will continue matching orders at subsequent price levels until the entire position has been executed.

Therefore, a single liquidation may consist of multiple execution records.

This is a normal result of the market matching mechanism.

V. How Is the Average Execution Price Calculated?

The system calculates the final average execution price using the weighted average of all executed trades based on their execution prices and quantities.

For example:

Final Average Execution Price:

(89,530 × 0.5 + 89,470 × 0.8 + 89,350 × 0.7) ÷ 2.0 = 89,412.30

The average execution price displayed on the platform is this weighted average price.

VI. Why Doesn't the System Wait for the Price to Recover?

The purpose of forced liquidation is to control risk and prevent further losses.

Once the liquidation conditions are met, the system must immediately execute the liquidation order. It will not wait for the market price to recover, as doing so could result in greater losses or even make the position impossible to close.

VII. Are There Any Additional Fees for Forced Liquidation?

A forced liquidation fee may apply in accordance with the platform's fee schedule (where applicable).

Apart from this, any difference between the liquidation trigger price and the actual execution price is solely the result of normal market matching and liquidity conditions, not an additional fee charged by the platform.

Reminder

• The liquidation price is only the trigger price for initiating forced liquidation and is not a guaranteed execution price.
• The actual execution price is determined by real-time market liquidity and order book depth.
• For large positions or in markets with limited liquidity, the system may split the liquidation into multiple executions.
• The average execution price displayed on the platform is the weighted average of all execution records.
• During periods of high market volatility, a certain degree of slippage is a normal market phenomenon.