Liquidation Approach
GRVT’s smart contracts limit trust in exchange operators during liquidations. The backend must prove to the smart contract that the account is liquidatable, ensuring secure close-outs without increasing user risk or conducting unauthorized operations.
To minimize the impact of liquidation on users, GRVT only liquidates the amount required to bring the margin to the maintenance level, rather than liquidating the entire portfolio. We charge liquidation fees to the positions that get liquidated.
Liquidation for Cross Margin positions
To help users manage risk, our system computes the following on a regular basis:
Margin Balance (MB)
Initial Margin (IM)
Note: per the perpetuals or futures, probably different leverages (set by clients) to different symbols
Initial Margin Rate (IM Rate)
IM/MB
Maintenance Margin (MM)
Note: per the perpetuals or futures, probably different tiers to different symbols
Maintenance Margin Rate (MM Rate)
(MM + Liquidation Fee) / MB
Tiered Risk Model
| Tiers | Limitations |
1 | IM Rate < 100% | N.A. |
2.1 | IM Rate >= 100% MM Rate < 75% | Only risk-reducing orders* can be placed |
2.2 | IM Rate >= 100% 75% <= MM Rate < 90% | Only risk-reducing orders* can be placed |
2.3 | IM Rate >= 100% 90% <= MM Rate < 100% | Only risk-reducing orders* can be placed
|
3 | MM Rate >= 100%
|
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*Risk-reducing order: Reduce the size of the existing positions