Liquidations

Liquidations are local to a risk universe: the auction and the Security Module backstopping it all belong to the universe the liquidated subaccount sits in.

Auction Parameters

These are global and shared by all four universes.

Parameter	Contract Variable	Value	Description
BUFFER_SCALE	`auction_params.buffer_margin_pct`	1.2	`Buffer Margin = MtM + BUFFER_SCALE x (Maintenance Margin - MtM)`. The buffer sits a fifth of the margin requirement below maintenance margin.
INITIAL_DISCOUNT_FACTOR	`auction_params.starting_mtm_pct`	0.98	The price factor the solvent auction starts at: bidders pay 98% of mark-to-market, a 2% discount.
THRESHOLD_DISCOUNT_FACTOR	`auction_params.fast_auction_cutoff_pct`	0.80	The price factor at the end of the fast phase, a 20% discount.
SHORT_DURATION	`auction_params.fast_auction_length_sec`	1,200 s (20 minutes)	Duration of the fast phase, over which the price factor falls linearly from 0.98 to 0.80.
LONG_DURATION	`auction_params.slow_auction_length_sec`	43,200 s (12 hours)	Duration of the slow phase, over which the price factor falls linearly from 0.80 to 0.
INSOLVENT_DURATION	`auction_params.insolvent_auction_length_sec`	3,600 s (1 hour)	Duration over which the insolvent auction offer moves from `min(0, MtM)` to the current maintenance margin.
LIQ_FEE_PERCENT	`auction_params.liquidator_fee_rate`	0.05 (5%)	The liquidation fee, charged on the fraction of the account liquidatable at zero discount.
MTM_CUTOFF	`auction_params.mtm_cutoff`	0	Mark-to-market level below which the auction is treated as insolvent.

The solvent auction price factor is

Formula

d(t) = 0.98 - (0.98 - 0.80) * t / SHORT_DURATION                    for t <= SHORT_DURATION
d(t) = 0.80 - 0.80 * (t - SHORT_DURATION) / LONG_DURATION           thereafter

and the fee is

Formula

Liquidation Fee = LIQ_FEE_PERCENT * f_max(1.0) * MtM Value
f_max(1.0)      = Buffer Margin / (Buffer Margin - MtM Value)

f_max is rounded up to the nearest 1% before the fee is computed.

Termination

A bid does not clear, and the auction terminates, if either holds at the time of the bid:

Condition	Meaning
`Buffer Margin >= 0`	The account is back above water. `Max Percentage` is clamped to 0.
`Reserved Funds >= MtM Value`	The bid price `(MtM - Reserved) x d` is no longer positive.

Security Module and Socialization

Every universe has its own Security Module: a dedicated subaccount holding that universe’s cash asset. An insolvency in one universe cannot draw on another universe’s backstop.

Parameter	Value	Description
SM subaccount (Prime / Hype / Alt / RWA)	68176 / 68177 / 68178 / 68179	The Security Module subaccount per universe on the current deployment.
SM_FEE	20%	Share of interest paid to positive cash holders that is diverted to the universe’s Security Module. Rises to 100% if the SM is depleted.
DT_WRITE_DOWN_SECONDS	900 s (15 minutes)	The window over which the maintenance margin impact of a socialization debit phases in.

When the Security Module cannot cover an insolvent bid in full, the shortfall H is socialized across the universe:

Formula

share_i     = H * mtm_i / total_spot_value
write_down  = clamp((now - issued_at) / DT_WRITE_DOWN_SECONDS, 0, 1)
MM credit_i = abs(debit_i) * (1 - write_down)

Cash is debited immediately and in full, so mark-to-market and initial margin feel it at once; maintenance margin is credited back and that credit decays to zero over 15 minutes. Accounts already under auction receive no credit. While the sweep is pending, every balance operation in that universe is rejected.

Product Details

Managers

Oracles and Liquidations

Parameters

Auction Parameters

Termination

Security Module and Socialization

​Auction Parameters

​Termination

​Security Module and Socialization

Auction Parameters

Termination

Security Module and Socialization