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A liquidation occurs when a trader’s account equity falls below the maintenance margin required to keep their positions open. Pacifica employs a three-tiered liquidation process designed to minimise market disruption and give positions the best chance of partial recovery before fully transferring collateral to the backstop liquidator.
Liquidations are triggered by the Mark Price, not the last traded price on Pacifica’s order book. Mark Price is a composite of the Oracle Price, Pacifica’s own best bid/ask/last, and external perpetual prices. A short-lived spike in the order book that does not move the Mark Price will not trigger your liquidation.

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Liquidation Price Formula

Liquidation occurs when account equity falls below the maintenance margin of all open positions. Maintenance margin is always 50% of the initial margin fraction (1 / max_leverage). The liquidation price for a position is: 
liquidation_price = [price - (side * position_margin) / position_size]
                    / (1 - side / max_leverage / 2)
Where:
  • side = 1 for long positions, -1 for short positions
  • position_margin is account_equity for cross-margin positions
  • price should be the current mark_price when account_equity already reflects unrealized PnL
For cross-margin positions, position_margin is drawn from the shared equity pool — meaning losses on other positions reduce the effective margin available to this position and move its liquidation price in real time.

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Three-Tiered Liquidation Process

1

Tier 1 — Market Liquidation

When account equity falls below the maintenance margin but remains above ⅔ of maintenance margin (the backstop threshold):
  1. All open orders, including those that would reduce exposure, are cancelled.
  2. The position is broken into chunks and sent as IOC market orders into the order book, placed as close to the backstop liquidation price as possible to avoid immediately triggering Tier 2.
  3. Chunk sizing is dynamic based on market leverage:
Small positions (< $2,000 × max_leverage): 1 chunk (immediate)
Large positions (≥ $2,000 × max_leverage): 5 chunks
A liquidation fee of max(0.75%, maintenance_margin_ratio × 0.4) of the liquidated notional is deducted by the liquidation engine.If enough of the position is closed to restore the account above maintenance margin, the remainder stays with the trader as a partial liquidation.
2

Tier 2 — Backstop Liquidation

If account equity falls below ⅔ of the maintenance margin, the remaining open positions and collateral are transferred in full to Pacifica’s backstop liquidator. The backstop liquidator manages position closure systematically to minimise order-book disruption during large market movements.Any collateral remaining after backstop liquidation fees and slippage is returned to the trader’s account.
Due to their experimental or volatile nature, the backstop liquidator does not accept positions from the following markets: URNM, GOLD, SILVER, PAXG, CL, COPPER, NATGAS, EURUSD, USDJPY, NVDA, TSLA, PLTR, SP500, GOOGL, CRCL, HOOD, MEGA, BP.
3

Tier 3 — Auto-Deleveraging (ADL)

If account equity falls below zero while a position remains open — because Tier 1 and Tier 2 had insufficient liquidity — Pacifica automatically closes opposing profitable traders’ positions based on risk priority. ADL is a last-resort mechanism to maintain overall market health and prevent socialized losses from propagating across the platform.

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Spot Insolvency Deleveraging

Unified margin accounts can hold negative USDC balances backed by spot collateral. If a borrower’s spot collateral value becomes insufficient to support their USDC debt and perpetual margin requirements, a separate deleveraging path unwinds spot positions. This is distinct from the perpetual liquidation process. Spot deleveraging runs in two modes:
ModeTrigger
Account-levelAn individual borrower’s spot collateral no longer covers their USDC debt and/or perpetual initial margin.
Pool-levelMoney-market utilisation reaches ≥ 95%. Deleveraging proceeds from the largest borrowers first, targeting a return to 90% utilisation.
In both modes, the system liquidates the account’s spot assets into the spot order book to repay outstanding USDC loans.

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Why Your Liquidation Price May Have Changed

The liquidation price displayed in the UI is a conditional estimate based on the current state of all your positions and equity. Several factors can cause it to shift unexpectedly:

Cross Margin Losses

Losses on other cross-margin positions reduce your shared equity pool, tightening the effective liquidation threshold on every cross position simultaneously.

Funding Rate Payments

For isolated margin positions, hourly funding payments are deducted from the isolated margin balance, moving the liquidation price closer to market over time.

Mark Price Movement

Liquidation is calculated using Mark Price, not last traded price. If Mark Price diverges from the last trade (e.g. due to the composite calculation), the effective liquidation point differs from a last-price-based estimate.

Dynamic Margin Adjustment

When open interest rises sharply relative to order-book liquidity, Pacifica automatically increases initial margin requirements, which raises maintenance margin and can bring liquidation prices closer to market.

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How to Avoid Liquidation

  • Monitor your margin ratio regularly, especially during volatile markets. The portfolio page displays your current equity, maintenance margin, and margin ratio in real time.
  • Use isolated margin for high-conviction single-position trades where you want a predictable, stable liquidation price that is not affected by other positions.
  • Avoid holding multiple correlated positions at high leverage on cross margin. Losses compound across the shared equity pool during correlated market moves.
  • Set stop-loss orders — preferably stop-market orders — to close positions before they reach the liquidation threshold. Stop-limit orders may not fill if the market gaps through the limit price.
  • Use the reduce-only flag on closing orders to ensure they can never inadvertently open a new position in the opposite direction.
  • Add margin to an isolated position or deposit additional USDC to improve your equity ratio before it falls to critical levels.
For isolated margin positions held over multiple funding periods, check that accumulated funding payments have not significantly eroded your margin balance and shifted your liquidation price closer to market.

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Frequently Asked Questions

There are two common causes. First, if you are using cross margin, losses on other open positions reduced your shared equity pool, which raised the effective liquidation threshold on this position before its own price moved far enough. Second, your liquidation price is calculated from the Mark Price, which is a composite value that can differ from the last traded price shown on the chart. The chart price may not have reached your displayed level, but the Mark Price did.
Not necessarily. Tier 1 (market liquidation) is a partial process: if enough of the position is closed to restore your equity above maintenance margin, the remaining position stays with you. Any collateral left over after backstop liquidation fees and execution slippage is also returned to your account. However, during fast markets or for very large positions, full liquidation is possible.
At the start of Tier 1 market liquidation, all of your open orders are cancelled — including resting limit orders that would otherwise reduce your exposure. This is done to free up any reserved margin and ensure the liquidation engine has full access to your collateral.
Yes, if the Mark Price reaches or breaches your liquidation threshold, the liquidation process begins immediately. However, partial liquidation in Tier 1 means that if the market recovers quickly and enough of the position has been closed to restore equity above maintenance margin, the remaining position will be returned to you rather than fully liquidated.
ADL is a last-resort mechanism triggered only when a liquidated account’s equity goes deeply negative and insufficient order-book liquidity exists to absorb the position. In this scenario, Pacifica closes profitable traders’ opposing positions at their current mark price to cover the shortfall. You will be notified in your trade history if an ADL event affects your account. ADL is rare and only occurs under extreme conditions.

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