What Is a ‘Liquidation Fee’ and How Is It Determined?
A liquidation fee is a charge applied to a trader's position when it is liquidated by the exchange's risk engine. This fee is typically a small percentage of the notional value of the liquidated position.
The fee covers the cost of the liquidation process and, crucially, a significant portion of it is directed to the exchange's insurance fund. The exact percentage is set by the exchange and varies based on the margin system and asset.
