How Are Liquidations Triggered on Binance Margin?

Binance Margin provides users the flexibility to choose different leverage multipliers for their individual risk appetite and trading strategies. Depending on the Margin product, leverage can vary from 3x up to a maximum of 10x.

When the liquidation threshold is reached, a user’s margin position will be liquidated and their collateral will be sold to repay any liabilities and interest owed.

Each margin mode and leverage multipliers have different liquidation margin levels.

There are two types of forced liquidation: regular liquidation and takeover liquidation. The system determines the liquidation method based on the market liquidity of the traded assets.

Regular liquidation takes place within the user's margin account, where collateral assets are sold to offset liabilities and accumulated interest. During the liquidation process, the account is locked, preventing the user from transferring funds, borrowing or repaying assets, or trading.

Takeover liquidation occurs when the traded assets are deemed to lack sufficient liquidity during the given period. Upon triggering a takeover liquidation, all collateral assets and liabilities in the user's margin account are transferred to the Binance liquidation account. The liquidation engine then consolidates and sells the collateral assets, and manages the liability and interest repayments. During periods of high market volatility, takeover liquidation cases may require a significant amount of time to complete, as multiple users’ collateral assets are waiting to be sold.

During extreme market volatility, or when the collateral ratio of a user's held assets is low, both regular liquidation and takeover liquidation may happen on their positions. The liquidation engine will partially trade the collateral assets to repay some liabilities. If the market liquidity worsens during this process, it transitions into a takeover liquidation. This transition allows the liquidation to occur in a manner that minimally impacts the actual market price volatility at that time.

User A has a net equity of 2 BTC and a 400,000 USDT loan in their Cross Margin account. They buy 8 BTC at 50,000 USDT, with the Margin Level (ML) at 1.25. When BTC price drops to 44,000 USDT, ML drops to 1.1 and triggers a forced liquidation. 10 BTC is sold for 440,000 USDT to return the 400,000 USDT liability (assuming no interest) and pay a liquidation fee of 8,000 USDT. After the liquidation, User A has 32,000 USDT remaining in their Cross Margin account.

User B has a net equity of 100,000 SUPER (assuming no collateral haircuts) and a 400,000 USDT loan in their Cross Margin account. They buy SUPER at 1 USDT, with the ML at 1.25. When SUPER price falls to 0.88 USDT, the ML falls to 1.1 and triggers a forced liquidation.

Instead of immediately selling 500,000 SUPER, the liquidation engine determines SUPER to have poor liquidity and triggers a takeover liquidation to prevent introducing further volatility for SUPER. All collateral assets (500,000 SUPER) and liabilities (400,000 USDT) will be transferred from User B’s account to a unified takeover account, and SUPER will be gradually sold based on market liquidity to repay the USDT liabilities. Assuming an average SUPER trading price of 0.87 USDT in the unified takeover account, the remaining 27,000 USDT will be returned to User B’s Cross Margin account after repaying a 400,000 USDT debt and deducting a 8,000 USDT liquidation fee.

User C has a net equity of 1 BTC and 50,000 SUPER (assuming no collateral haircuts), and a 400,000 USDT loan in their Cross Margin account. They buy SUPER at 1 USDT, with the ML at 1.25 (assuming BTC price is 50,000 USDT and remains unchanged).

When SUPER falls to 0.866666667 USDT, the ML falls to 1.1 and triggers a forced liquidation. The liquidation engine sells 1 BTC for 50,000 USDT. Instead of immediately selling 500,000 SUPER, it determines SUPER to have poor liquidity and opts for a takeover liquidation. All of User C’s collateral assets (450,000 SUPER and 50,000 USDT) and liabilities (400,000 USDT) are transferred to a unified takeover account. Assuming an average SUPER trading price of 0.86 USDT in the unified takeover account, the remaining 29,000 USDT will be returned to User C's Cross Margin account after repaying a 400,000 USDT debt and deducting a 8,000 USDT liquidation fee.

According to Margin Service Terms of Use, a certain percentage of the liquidation fee will be charged both on regular liquidation and takeover liquidation:

Based on the rates above, if the total amount of liquidated assets is 400,000 USDT, the liquidation fee will be 8,000 USDT.

The liquidation fee will be deducted from the user's remaining assets.

In margin trading, forced liquidations may bring significant losses. Therefore, we recommend exercising prudent risk management to avoid being liquidated:

Users should pay close attention to the risk ratio of their margin positions at all times. They should also make sure that the collateral is sufficient to maintain their positions, and make necessary risk control adjustments in advance.

Margin calls aim to notify users via emails/app push/inmails of the risk in their margin positions, so they can make timely decisions or adjust their strategies to avoid forced liquidations.

Users can also use the Auto Top-Up function to reduce the risk of forced liquidations. After enabling the function, the system will automatically transfer available assets from their Spot Wallet to their Margin Wallet.