Forced Liquidation Priority

Forced liquidation priority is the order in which a platform executes the closure of under-collateralized positions. The engine must determine which accounts to liquidate first to minimize the risk to the platform.

Factors influencing this priority include the size of the position, the degree of under-collateralization, and the potential market impact of the liquidation. Larger positions that pose a greater threat to the system are typically prioritized.

The priority system ensures that the most dangerous risks are addressed first, preventing them from cascading into larger issues. This process is automated and operates within milliseconds to ensure timely intervention.

The rules governing this priority are often set out in the exchange's risk policy and are designed to be objective and predictable. For traders, knowing their position's priority level can help them understand the urgency with which they must add collateral.

It is a critical component of the exchange's overall risk mitigation strategy.