Termination is the closing or reducing of one or more profitable positions to settle a position that has gone into stage three liquidation. Termination will only occur if the liquidation fund has insufficient supply to cover the loss that remains after it has depleted the liquidated position's allocated collateral.
When a position gets liquidated, the system can go through three stages:
- The system first tries to close the position using the margin collateral allocated to the newly liquidated position.
- If the forfeited collateral is insufficient to fully close the position, then the liquidation fund will be used to cover the remainder of the loss if sufficient funds are available.
- Termination occurs if any losses are left and the liquidation fund is depleted. The system will take the position on the derivatives platform with the highest percentage gain and closes/reduces it to cover the remaining losses. It will keep terminating the position with the highest percentage gain until all losses are covered.
If selected for termination, these positions will likely be closed at prices worse than prevailing market prices. The possibility that a position might be terminated, even if this only happens in exceptional circumstances, should be taken into account when assessing the risks of derivatives trading.
Why was my position terminated?
Termination only occurs for positions that are in profit and begins by targeting the current open position with the highest percentage profit. If your position was terminated, this means that our liquidation fund combined with the collateral assigned to a liquidated position were insufficient to cover the loss on that liquidated position.
