How Does an Exchange’s Liquidation Fee Structure Work?

An exchange's liquidation fee structure typically involves a small percentage fee charged on the notional value of the liquidated position. This fee is often split: a portion goes to the exchange's revenue, and the remaining portion is contributed to the insurance fund.

The fee incentivizes traders to manage their risk and close positions manually before liquidation occurs. The fee rate may vary based on the margin tier and the contract type.