What Is ‘Liquidation’ in the Context of a Futures Margin Call?
Liquidation is the forced closing of a futures position by the broker or exchange's risk management system. It occurs when a trader fails to meet a margin call, meaning their account equity has fallen below the maintenance margin and they have not deposited the required additional funds.
The exchange forcibly offsets the position to prevent further losses and to ensure that the loss is covered by the remaining margin, protecting the clearing house and other market participants.
