Liquidation Overview

Liquidation

Liquidation for Cross Margin Mode

Liquidation for Perpetuals and Futures

Liquidation Process:

Bybit uses Mark Price to avoid liquidation caused by low liquidity or market manipulation. Under Cross Margin mode, when Available Balance decreases to 0 and Position Margin decreases to the Maintenance Margin level, the position is liquidated. Please take note that when holding hedged Long/Short positions under Cross Margin mode, only the net Long or net Short position may be liquidated. Fully hedged portions will not be liquidated. When liquidation happens, Bybit uses partial liquidation to reduce the required maintenance margin to avoid full liquidation. The liquidation process is as follows.

Traders under the lowest margin tier:

(Unified Trading Account) Cancel all open Derivative orders and Spot orders that may increase position size / (Derivatives Account) Cancel all open derivative orders

If it still doesn’t meet the maintenance margin requirement, the position will be closed at the Bankruptcy Price by the liquidation engine.

Traders under second or higher margin tier:

The liquidation engine will try to lower the margin tier to lower the margin requirement:

Cancel active orders of all contracts;

Submit a FillOrKill order of the difference between the current position value and the lower margin tier value which satisfies the margin requirement, thus preventing further liquidation;

If the position still doesn’t meet the maintenance margin requirement, the whole position will be closed at the Bankruptcy Price by the liquidation engine.

For more information on the liquidation process, please click here.

Liquidation Triggered for User's Positions:

When using Cross Margin Mode or Portfolio Margin Mode (in the regular Derivatives Account and Unified Trading Account), liquidation is triggered on a per-account basis – the liquidation price is calculated based on Initial Margin Rate (IMR), Maintenance Margin Rate (MMR), and Available Balance of the entire account. When the Mark Price reaches the Liquidation Price, liquidation will be triggered for the entire account.

In the USDC Derivatives Account, Unified Trading Account in Cross Margin mode and Portfolio Margin mode, liquidation is triggered on a per-account basis: Initial Margin Rate (IMR) and Maintenance Margin Rate (MMR) are calculated based on the initial margin and maintenance margin of all positions in the account. When the IMR reaches 100%, all margin-occupying orders will be canceled. When the MMR reaches 100%, liquidation will be triggered.

Liquidation for Options

Long positions of Options will not be liquidated as traders have already paid the full premium at the time of purchase, only short positions of options will be liquidated. The liquidation engine will check all positions and select appropriate option positions for partial liquidation until the risk rate is below 90%.

Liquidation for Isolated Margin Mode

Under Isolated margin, when Position Margin decreases to Maintenance Margin level, the position is liquidated. Please take note that even if a trader holds long and short positions simultaneously with the "Hedge" Position mode under Isolated Margin mode, there is a possibility that both positions may still get liquidated under extreme market movement since the long and short positions are independent.

Liquidation Triggered for User's Positions: When using Isolated Margin Mode, liquidation is triggered on a per-position basis – the liquidation price is calculated based on the Initial Margin Rate (IMR) and Maintenance Margin Rate (MMR) of each position. When the Mark Price reaches the Liquidation Price, liquidation will be triggered for the particular position.

Liquidation in Portfolio Margin Mode

If a trader borrows assets, the borrowed assets will be automatically repaid when the Maintenance Margin Rate (MMR) reaches 80% until there are no more borrowed assets.

If a user does not have borrowed assets, when the Maintenance Margin Rate (MMR) reaches 100%, partial liquidation will be triggered. During the execution process, Bybit will calculate based on each position in the account and reduce the position that can most reduce the MMR until it reaches 90%. It should be noted that Bybit will not use any means to increase position sizes (such as delta hedging) to reduce risk.

For more details on liquidation in the Unified Trading Account, please click here.

Insurance Fund

If Bybit can close the liquidated position at a better value than the bankruptcy price, the residual margin will be added to Bybit's Insurance Fund If Bybit is unable to close the liquidated position at a better value than the bankruptcy price, the insurance fund will be drawn to absorb the loss. If the insurance fund is insufficient to cover the loss, Auto-Deleverage (ADL) will be triggered. Bybit uses the insurance fund to prevent traders from auto-deleveraging. All Contracts share the same insurance fund to prevent the unnecessary ADL of less liquid contracts.

ADL Mechanism

When a position gets liquidated, it will be taken over by the Bybit liquidation engine. If the liquidated position can not be closed at a better than Bankruptcy Price, and the insurance fund is insufficient to cover the loss, ADL mechanism will deleverage the opposite positions with the highest ADL ranking. ADL ranking is based on the effective leverage and P&L percentage.

ADL Ranking

ADL ranking of each position is indicated by ADL indicator. Each lit light indicates a 20% increase in the ADL ranking priority. Under cross margin mode, should ADL be triggered, only the net long or short position will be auto-deleveraged. Under isolated margin mode, the long position and short position of the same contract may be auto-delevelaged by the ADL mechanism separately.

ADL Ranking Calculation

ADL ranking is determined by P&L percentage and the effective leverage high profit% and high leverage lead to high ADL ranking.

ADL Ranking = P&L Percentage × Effective Leverage (If P&L Percentage > 0) ADL Ranking = P&L Percentage / Effective Leverage (If P&L Percentage < 0) Effective Leverage = Abs[(Mark Value/(Mark Value - Bankruptcy value)] P&L Percentage = (Mark Value - Avg Entry Value) / (Avg Entry Value) Mark Value = Position Value at Mark Price Bankruptcy Value = Position Value at Bankruptcy Price Avg Entry Value = Position Value at Average Entry Price