▶ Liquidation, ADL and insurance fund – WOO X

Liquidation

The account will get liquidated when the margin ratio in your account falls below the maintenance margin ratio (MMR). The default margin ratio is 1,000%, indicating you haven’t opened any position.

The larger the position, the higher the MMR you will need to uphold. Traders are advised to pay close attention to the movements of the mark price and the liquidation price to avoid being liquidated.

Once your account triggers liquidation, it will be locked during the liquidation process. You will not be able to place/modify/cancel your order and the withdrawal function will be temporarily disabled. The liquidation process will stop once your account margin ratio is larger than your account MMR. The liquidation engine will carefully close positions to minimize the impact on the market. WOO X utilizes Backstop Liquidity Providers (BLP) or liquidators, our dedicated liquidity providers, to process liquidated positions that are near their bankruptcy price along with a three-phase liquidation process for all scenarios with various trigger points. Detailed calculations for these triggers can be found in the appendix.

Phase	Trigger conditions	Liquidation process
I - Hedge position netting	TC < MM	All pending orders will be canceled, including spot and futures orders. Fully hedged positions will be netted at the mark price. Taker fees will be charged on both sides based on the user's fee rates.
II - Market liquidation	ACMM <= TC < MM	All pending orders will be canceled, including spot and futures orders. x% of the positions will get partially liquidated across all perp symbols, where x = max[ min( notional_i, 2000 ) / notional_i, max( 20%, 1 - TC / MM ) ] A trading fee of 0.1% will be charged and collected by the insurance fund.
III - BLP liquidation	TC < ACMM	All pending orders will be canceled, including spot and futures orders. The remaining perp positions will be closed at the bankruptcy price and taken over by liquidators. Non USDT collaterals will be liquidated based on the discounted index price, where the discount equals to 1 - ( 1 - CR ) / 5, to cover any USDT debits. The liquidation ordering depends on the token liquidity defined (see appendix). Tokens with better liquidity will be liquidated first, though this order is subject to change based on market conditions, and the table below should be considered as a reference, not an exact or final ranking. A liquidator fee of ACMM / 3 will be charged by liquidators. Any excess or shortage of margin will be collected or absorbed by the insurance fund.

Auto deleverage (ADL)

If the insurance fund gets depleted or liquidators are unable to take over liquidated positions, the ADL system automatically deleverages opposing traders' positions by profit and leverage priority, represented by the ADL indicator in the Portfolio tab and in the order history. The ADL indicator shows your position in the auto-deleverage queue. The more lights that are lit, the more likely your positions will be reduced in the event of liquidations.

During ADL, trading will be suspended for that symbol. No additional trading fees will be incurred during the ADL process.

Insurance fund

Insurance funds are pools of funds set up by WOO X to cover losses that may occur due to unexpected events, such as liquidations in futures trading. It acts as a defense against contract loss in leveraged trading and is used to pay the traders in the event of liquidations who fail to take measures in time to prevent their open positions from going bankrupt. The insurance fund is funded through liquidation fees and WOO X contribution.

At WOO X, we have set up separate insurance funds for:

BTC and ETH perpetual contracts that offer 100x leverage.
Other perpetual contracts with the maximum leverage of 20x or lower.

We are aiming to provide a diversified, stable and flexible insurance fund system that supports all perpetual contracts.

Insurance funds will cover the loss when a position's liquidation price goes lower than the bankruptcy price as well as the liquidation fee when traders’ margin cannot cover the minimum liquidation fee.

The insurance fund is considered depleted when its balance has dropped 30% from peak within 8 hours or is below 0.

Appendix

Terminology

TC = sum( ( holding_i + interest_i ) * discount_i * indexPrice_i ) + unrealizedPnL, where i = eligible collateral tokens
MM = sum( notional_i * ( max( 0.6 / leverage_i, 0.6 * imrFactor_i * (notional_i)^(2/3)) + 0.03% ) ), where i = perpetual position symbols
ACMM = sum{ notional_i * [ max( min( 0.6 / leverage_i, 0.6% ), ( 0.5 * 0.6 / leverage_i ) ) + 0.03% ] }, where i = perpetual position symbols

Liquidity groups

Group	Assets
1	AAVE, ADA, ARB, ATOM, AVAX, BCH, BNB, BONK, BTC, BTC, BUSD, CAKE, DAI, DOGE, DOT, ENJ, ETC, ETH, ETH, FIL, GRT, HBAR, ICP, IMX, INJ, JASMY, LDO, LINA, LINK, LTC, MATIC, MKR, NEAR, NEO, OKB, OP, PEOPLE, PEPE, REEF, REN, RNDR, RUNE, SHIB, SOL, SUI, TIA, TON, TRX, UNI, USDC, VET, WOO, XRP
2	1INCH, ACE, AEVO, AGLD, ALGO, ALICE, AUDIO, BAL, BCH, BLUR, CELO, CFX, CHZ, COMP, CRV, DYDX, EOS, ETHFI, FXS, GMT, GMX, JTO, JUP, KSM, LRC, MAGIC, MANA, MERL, OCEAN, OMG, OXT, PYTH, RLC, RSR, RVN, SAND, SKL, SNX, SPELL, STG, STRK, TNSR, TRB, W, WIF, XLM, XTZ, YGG, ZEC, ZRO, ZRX
3	APE, ARKM, AXS, BADGER, BAND, BIT, BOME, BSV, CELR, DASH, DODO, ENA, ENS, ETHW, FTM, FTT, GALA, MANTA, METIS, NMR, ONDO, ONE, ONT, ORDER, ORDI, PENDLE, PERP, PIXEL, POL, PRIME, PYR, RAY, RDNT, RENDER, REZ, RON, RPL, SRM, SUSHI, WLD, YFI, ZK
4	AIOZ, ANALOS, ASD, AURORA, BENJI, BLAST, BNT, BOBA, BRETT, C98, CAT, CKB, CRO, CVX, DEGEN, ETH, FEDCUT, FEDCUT, FEDNOCUT, FLC, FOXY, FPDGOD, FPLP, FPMIL, FPPPG, FPPUNKS, FWOG, G, GAL, GFI, GST, HABIBI, HNT, HT, KUB, LEO, LOOKS, LUNC, LUNR, MAVIA, MCG, MUBI, NEIRO, NEON, NUTS, ORCA, PLANET, PONKE, POPCAT, PRCL, PROPC, PSP, PURSE, QI, QRDO, RETARDIO, ROOK, SLERF, STFX, TOKEN, TRAC, UAZUKI, UBAYC, UC721, UCAPTAINZ, UDEGOD, UMA, UMIL, UPPG, UXLINK, VELODROME, VIC, VOYA, WEN, WSM, XAUT, XR, ZETA, ZIG, ZKF