How Does an Exchange’s Liquidation Engine Interact with the Index Price?

The liquidation engine is the automated system that forcibly closes a trader's leveraged position when their margin balance falls below the maintenance margin level. It uses the robust Index Price (or a Mark Price derived from it) to accurately value the collateral and the position.

Using the Index Price, rather than a potentially manipulated or volatile Last Traded Price, ensures that liquidations are triggered only by genuine market moves and not by temporary price spikes.