What Is the Main Goal of the Exchange's Liquidation Engine? ⎊ Path

What Is the Main Goal of the Exchange’s Liquidation Engine?

The main goal of the exchange's liquidation engine is to manage risk and protect the exchange's solvency. It ensures that a trader's losses do not exceed their deposited margin, which would create bad debt for the exchange or its insurance fund.

By automatically closing underwater positions, the engine minimizes the impact of individual large losses on the overall market and other traders.

What Is ‘Forced Liquidation’ and Why Does an Exchange Perform It?

What Is a Liquidation Engine and How Does It Function?

Can a Trader Withdraw Excess Margin from Their Futures Account?

Define “Socialized Losses” in the Context of a Derivatives Exchange’s Insurance Fund

What Is “Recourse” in the Context of a Margin Trading Agreement?

Does “Limited Risk” Mean a Trader’s Loss Is Strictly Capped at Their Margin in Options Trading?

Can a Trader Lose More than Their Initial Margin in a Highly Volatile Market?

What Is the Role of a “Liquidation Engine” in Derivatives Platforms?

Glossar

Liquidation Engine

Mechanism ⎊ A Liquidation Engine within cryptocurrency derivatives functions as an automated process triggered by margin calls, designed to mitigate counterparty risk for exchanges and lenders.

The Liquidation Engine

Engine ⎊ The Liquidation Engine is a critical, high-speed automated system at the core of a derivatives exchange's risk management infrastructure.