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What Is the Role of Centralized Exchanges in Managing Margin Liquidation Risks?

CEXs set margin rules, run automated liquidation engines, and use insurance funds to manage counterparty risk.
Greeks.Live20.11.25

What Is the Role of Centralized Exchanges in Managing Margin Liquidation Risks?

Centralized exchanges (CEXs) manage liquidation risks by setting margin requirements, implementing automated liquidation engines, and maintaining insurance funds. They act as the counterparty to manage the risk of account balances falling below zero.

By liquidating positions efficiently, they aim to protect the exchange and the insurance fund, though the forced selling contributes to market volatility.

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