Liquidation
Last updated
Last updated
An account is subject to liquidation if its Account Margin Ratio falls below its Maintenance Margin Ratio. JOJO uses the Mark Price to represent a contract’s estimated value. As it derives from multiple reputable spot exchanges (see Index Price) and the funding rate, it is less volatile than the Last Price and discourages bad actors from manipulating the market price to trigger liquidations.
When an account is under liquidation, its current open orders are automatically cancelled and its USDC balance is frozen.
Unlike CEXes (Centralized Exchanges) or a few other dApps such as dYdX, at JOJO, liquidations are decentralized.
Most of the time, CEXes directly close positions on the orderbook, which often triggers cascading liquidations, hurting traders further and encouraging bad actors to manipulate market prices.
JOJO adopts a decentralized liquidation model where positions are transferred to liquidators at a discount instead of being market sold in the orderbook. It is fully decentralized as anyone with an JOJO account can act as a liquidator, as long as the account has enough margin to take over the liquidated positions. Further details on how an account can claim liquidating positions can be found in the API docs.
A liquidation is triggered if the Account Margin Ratio (AMR) is below the Maintenance Margin Ratio (MMR) required for the account (see for more details).
All trading pairs are not equal in term of risk. In JOJO, there are two groups of symbol tier :
Low Tier Risk : Liquidators can only claim a ratio of all symbols. Claiming a single symbol is not allowed
High Tier Risk : Liquidators can claim 1 single symbol
Low
BTC ; ETH
High
Others
The amount of positions that need to be liquidated is calculated for both low tier and each symbol of high tier perp markets. Whenever possible, each amount is computed so that the Account Margin Ratio equals the Initial Margin Ratio.
If the account has multiple positions in the low tier risk, the positions will be partially liquidated in a volume-weighted fashion.
When an account is liquidated, a User Liquidation Fee is incurred. This is split between the JOJO Insurance Fund and the liquidator. Each perpetual market has its own Liquidation Fee:
BTC
0.80%
0.40%
ETH
0.80%
0.40%
Altcoins (10x)
1.50%
0.75%
Altcoins (20x)
2.40%
1.20%
The overall User Liquidation Fee and Liquidator Fee are calculated as follows:
Low Tier Liquidation (multiple symbols):
Copy
High Tier Liquidation (1 symbol):
Copy
If the Account Margin Ratio is higher than the User Liquidation Fee, the User Liquidation Fee is split in half between the Insurance Fund and the liquidator (Insurance Fund and Liquidator each receives 0.5 * User Liquidation Fee).
If the Account Margin Ratio is between User Liquidation Fee and Liquidator Fee, then a fee equal to 0.5 * User Liquidation Fee is paid to the liquidator, and the remaining account margin is transferred to the insurance fund.
The minimum notional for a partial liquidation takeover is 10,000 USDC for low tier liquidations and 5,000 USDC for high tier liquidations. For liquidation positions below the threshold, in case of a low tier liquidation, the liquidator must take over all of the positions of the liquidated user and in case of a high tier liquidation of a specific symbol, the liquidator must claim the entire position. Above the threshold, the liquidator could choose to take over only a percentage of the positions of the liquidated user, provided that the notional of the positions taken over exceeds the threshold.
Before transferring positions to the liquidator, JOJO makes sure that the liquidator can effectively take over the positions, doing similar margin checks as for new order placements.
Click 【Main Account】 button on the upper right corner and choose 【Asset】
On the 【Asset】 page you will be able to view all the trades details, such as records for Transfer, Liquidation, etc.
Liquidation price
Because JOJO uses a cross-margin system, all positions share the same margin account. Therefore, once a user holds multiple positions, different markets may affect one another, resulting in the Final Liquidation Price differing from the Initial Liquidation Price.
/
Mark price
The Mark Price is a mechanism used in perpetual contracts trading on JOJO to ensure fair and accurate pricing of futures contracts. JOJO's mark price comes from Chainlink and Uniswap Oracle and is mainly used to calculate PnL.
/
Total balance
The total value of all assets in the user's account, calculated in USDC based on the real-time price of Chainlink.
/
Initial margin
The initial margin determines whether there is enough margin when placing an order at the current position the user wishes to open. As long as the user's account balance exceeds the initial margin, they can open a position on JOJO.
initial Margin = abs(paper Size) * order Price * initial Margin Ratio
Initial margin ratio
The initial margin ratio is the minimum margin required in a user's account when placing an order. It is calculated as the product of the initial margin ratio and the margin required for the desired order size.
The initial margin ratio also determines the maximum leverage allowed, with JOJO currently allowing a maximum leverage of 10X.The initial margin ratio is the minimum margin required in a user's account when placing an order. It is calculated as the product of the initial margin ratio and the margin required for the desired order size.
The initial margin ratio also determines the maximum leverage allowed, with JOJO currently allowing a maximum leverage of 10X.
Please note that the initial margin ratio may change in the future. Please refer to JOJO's announcement for updates.
max leverage = 1/initial margin ratio 10%
Maintenance margin
Maintenance margin refers to the minimum amount of USDC (or JUSD) necessary to ensure the safety of a user's account when placing orders at the current position.
Maintenance margin = ∑(abs(paper Size) * mark price * maintenance Margin Ratio)
Maintenance Margin Ratio
Generally speaking, the value of the maintenance margin ratio is usually lower than that of the initial margin ratio. Otherwise, users may be liquidated shortly after placing an order. Please note that the maintenance margin ratio may vary across different trading pairs. For more information, please refer to the 'Specification' section at the top right corner of the price chart on the trading page.
/
Position margin
Position margin used for the order
Position margin= ∑(abs(paper size) * mark price * initial Margin Ratio)
Paper size
Quantity of tokens in the position
/
Current price
The real-time price of a certain token from Chainlink.
/
Liquidation threshold
The maintenance margin ratio is equivalent to the liquidation threshold. They are measured from the perspectives of 'the minimum percentage of maintenance margin to ensure not being liquidated' and 'the percentage of maintenance margin that, if breached, would trigger liquidation.’ They are mainly used to differentiate between them in contract codes. Please note that the liquidation threshold may vary across different trading pairs. For more information, please refer to the 'Specification' section at the top right corner of the price chart on the trading page.
6%
Risk ratio
The value that measures the risk of the account.
risk ratio = maintenance margin/total balance
The JOJO Insurance Fund functions as a safeguard to protect bankrupt traders from being insolvent.
An account is bankrupt if it has a negative total collateral value. Under this scenario, the JOJO Insurance Fund will take over all the account’s positions and debt to protect other users.
In the majority of cases, JOJO Insurance Fund will collect part of liquidation fees from accounts that have enough margin. Over time, it should be growing. In the case of extreme market conditions, liquidators might not be able to liquidate positions in time. Some traders might become bankrupt, and this is where the Insurance Fund comes in and cover those losses.
If an Account Margin Ratio is insufficient to cover the minimum liquidator fee, all the positions and the remaining USDC balance of the liquidated account are transferred to the Insurance Fund.
Liquidators can make a request to claim Insurance Fund positions at a discount. This discount is slightly less than the liquidator fee.
The Insurance Fund is a special account that does not share the same margin requirements as a standard account. Important parameters are :
min_insurance_fund_margin_ratio: corresponds to the maintenance margin ratio for the Insurance Fund
min_margin_ratio_solvency: refers to the lowest level of margin ratio that the Insurance Fund must maintain to avoid becoming insolvent.
In the unlikely scenario where:
Liquidators don’t take over liquidated positions
No liquidators claim those positions on the Insurance Fund for some time, and
The Insurance Fund Margin Ratio falls below the min_insurance_fund_margin_ratio,
ADL or Auto-Deleveraging will be triggered.
The process consists first in selecting the top traders with the most profit and leverage, then offsetting the positions of the insurance fund in each perpetual market, one by one.
In the unlikely scenario that the remaining margin of the account cannot cover the Liquidator Fee, the account’s balance and positions are transferred to the insurance fund. Those positions can still be claimed by liquidators (see ).
