Tiered Liquidation

Tiered liquidation is a risk management strategy where an exchange closes a large, under-collateralized position in smaller, incremental blocks rather than attempting to liquidate the entire position at once. This approach is designed to reduce the market impact and price slippage that would occur if a massive sell or buy order hit the order book suddenly.

By breaking the liquidation into tiers, the engine allows the market to absorb the volume more efficiently. This helps maintain price stability and protects both the liquidating trader and the counterparty market makers.

It is a standard practice for large-scale derivatives platforms handling significant volumes of institutional-grade trading.