What is a Liquidation Event?

A liquidation occurs when your account equity falls below the Maintenance Margin. This happens when a market moves against your position to a point where you no longer have enough collateral to support your open trades.

• Maintenance Margin: This is calculated as half of the initial margin at maximum leverage.

• Leverage Range: Max leverage on Invo varies between 3x and 40x.

• Thresholds: Depending on the asset, your maintenance margin will sit between 1.25% (for 40x assets) and 16.7% (for 3x assets).

The Liquidation Process

When your equity drops below the required maintenance level, Invo triggers a two-step process:

1. Market Liquidation: The system first attempts to close your positions by sending market orders to the order book. If these orders successfully close your positions and restore your maintenance margin requirements, any remaining collateral stays in your account.

2. Backstop Liquidation: If the account equity drops below 2/3 of the maintenance margin without being successfully closed on the book, a backstop liquidation occurs.

[!IMPORTANT] During a backstop liquidation, the maintenance margin is not returned to the user. This buffer ensures the Liquidator Vault remains profitable and stable for the community.

Cross vs. Isolated Margin Liquidations

The impact of a backstop liquidation depends on your chosen margin mode:

• Cross Position: All cross positions and cross margin are transferred to the liquidator. If you have no isolated positions, your account equity will result in zero.

• Isolated Position: Only that specific position and its allocated margin are transferred. Your cross margin and other positions remain untouched.

Managing Your Liquidation Price

While Invo provides estimates, it is important to understand how these prices are calculated to monitor your risk effectively.

• Mark Price: Liquidations are triggered by the Mark Price, not the instantaneous book price. This combines external CEX data with Invo’s internal book state to prevent liquidations caused by "flash crashes" or temporary illiquidity.

• Estimation vs. Reality:

  • Pre-Trade: We show an estimated liquidation price, though this may shift based on book liquidity.

  • Post-Trade: Once open, the price is more certain but can still fluctuate due to funding payments or PnL changes in other cross-margin positions.

• Leverage Impact: For cross-margin, the liquidation price is independent of the leverage setting (lower leverage simply uses more of your available collateral). For isolated margin, the liquidation price is directly tied to the leverage you set.

Advanced Liquidation Features

Partial Liquidations

To prevent massive market impact, positions larger than 100k USDC undergo partial liquidation.

• Only 20% of the position is sent to the book initially.

• A 30-second cooldown follows a partial liquidation.

• During this cooldown, any subsequent liquidations for that user will cover the entire position.

The Invo Liquidator Vault

Backstop liquidations on Invo are democratized. Instead of profits going to a central exchange operator, the liquidation flow is handled by the Liquidator Vault. All PnL generated from these events is distributed back to the community through our liquidity provider systems.