What Is ‘Slippage’ and How Does It Relate to Liquidation Deficits?

Slippage is the difference between the expected price of a trade and the price at which the trade is actually executed. In a liquidation, high slippage means the position is closed at a much worse price than the bankruptcy price, resulting in a larger deficit.

This deficit is what the insurance fund must cover, and excessive slippage is the main cause of its depletion.