When a user's maintenance margin ratio falls below the required level, the position will be closed at its bankruptcy price (at which all margins are lost) and taken over by the liquidation engine.
When liquidation is triggered, the liquidation engine will take over the position at the bankruptcy price, and the liquidation profit generated will be injected into the insurance fund.
When liquidation is triggered, margin call loss will first be covered by the insurance fund. If the insurance fund is insufficient to cover the margin call loss, the remaining amount will be socialized with all profiting users of all three contract types (weekly, bi-weekly & quarterly) based on their profit through our clawback mechanism.
Clawback: Clawbacks will only occur if the insurance fund does not have enough funds to cover the system's total margin call losses. Only users that have a net profit for the day will be subject to clawback.
Clawback rate = (system losses + insurance fund) / Total net profit.
Clawback amount for the users who gained net profit = profit from perpetual x clawback rate.
The clawback amount will be deducted from the profit automatically.