Why Do Exchanges Use a Mark Price Instead of the Last Traded Price for Liquidations?

Exchanges use the Mark Price to prevent unfair liquidations caused by temporary market inefficiencies or manipulation. The Last Traded Price can be highly volatile and susceptible to sudden spikes or "wicks" on a single exchange.

The Mark Price, which is smoothed and tied to the Index Price, provides a more reliable and fair reference for calculating a position's true value and margin level.