Aster Perpetual Liquidation Protocols

1. Understanding liquidation mechanics

Liquidation happens when your account’s margin balance is not enough to cover the required maintenance margin of your open position. When this happens, the system will automatically close your position to prevent your balance from going negative. A forced liquidation is triggered when:​

Margin = Initial Collateral + Realized PnL + Unrealized PnL < Maintenance margin​

To avoid liquidation (i.e., when the risk ratio hits 100%), it's recommended to maintain a margin ratio below 80% by adding sufficient margin or reducing the position size.​

2. How is liquidation price determined on Aster

Forced liquidation occurs when the mark price reaches the liquidation price. Monitoring both the mark price and your liquidation price is crucial to prevent unwanted liquidations.​

Aster uses Mark Price to keep liquidations fair and to minimize the effects of price manipulation.

In cross margin mode with hedge trading, both long and short positions of the same contract share the same liquidation price. In isolated margin mode, long and short positions have different liquidation prices based on the margin allocated to each.​

A built-in perpetual calculator to compute liquidation prices is coming soon.​

3. What is the maintenance margin

Maintenance Margin is the minimum amount of margin required to keep your position open. Different positions have different maintenance margin requirements.

If your account margin ratio falls below the maintenance margin requirement, liquidation will be triggered.

4. What is the liquidation process

When your account margin falls below the required maintenance level, Aster initiates a forced liquidation to stop further losses and protect the protocol. The liquidation follows a staged, priority driven process that tries to avoid full liquidation where possible. Here is how it works step by step.

Liquidation steps

Step 1: Cancel open orders All open orders tied to the affected account are immediately canceled. This prevents new orders from affecting the liquidation flow. Step 2: Attempt position close with an Immediate-or-Cancel (IOC) order. The system issues one large Immediate or Cancel order (IOC). The IOC is filled as much as the market allows and any unfilled portion is canceled. This step tries to reduce the position size and eliminate the margin deficit without fully closing the position. Step 3:Recheck margin after realized losses and fees After the IOC executes, the engine recalculates your available margin accounting for realized losses and the liquidation fee. If the remaining assets meet the maintenance requirement, liquidation stops and your remaining position remains open. step 4: Bankruptcy and insurance fund takeover if deficit remains If the IOC cannot fully eliminate the deficit, the leftover portion becomes a bankrupt position. That portion is closed at the bankruptcy price and handed to the Insurance Fund, which covers losses arising from the bankrupt position to the extent possible.

The trader account is marked bankrupt if losses exceed available collateral. Any remaining assets (if applicable) are also allocated to the insurance fund.

Step 5: Handling a negative wallet balance and further failures If closing the bankrupt position still leaves the trader balance negative, the insurance fund covers the shortfall if possible. If the insurance fund cannot fully cover losses, the system may trigger Auto-Deleveraging, in which profitable opposing positions are reduced to make up the deficit.

Additional details and notes

• Smart Liquidation principle The protocol uses a smart liquidation approach that prioritizes partial close via the IOC to avoid a full forced close when possible.

• Bankruptcy price The bankrupt portion is closed at the bankruptcy price, which is the protocol price used to finalize the bankrupt position. Profits or remaining assets from handling bankrupt positions are retained by the insurance fund.

• Position size and margin tiering Smaller positions often have less buffer and are more likely to be liquidated fully. Larger positions may receive more gradual, tiered liquidation treatment that helps avoid immediate full liquidation.

• Fees and recommendations Liquidation involves realized loss plus a liquidation fee. To avoid forced liquidation and fees, close positions manually before you approach the maintenance margin threshold, reduce leverage, or add collateral.

5. Liquidation settlement and negative balance handling

If your account ends up with a negative balance after liquidation, Aster may use funds from the insurance fund to cover the loss, but only under specific conditions.

To qualify for automatic settlement, all of the following must apply:

• The negative balance is in a USDT perpetuals account.

• The account has no open positions (cross or isolated margin).

• The negative balance does not exceed 5,000 USDT.

• No funds have been transferred into the account after liquidation to offset the loss.

6. Why does liquidation price keep changing

The liquidation price is dynamic because it depends on your position and margin, any change in your total account equity will adjust the liquidation threshold automatically. You can refer to some key factors below:

• Funding payments

• Collateral value fluctuations

• New positions opened or closed

• Cross margin effects

7. Liquidation Fee

When your position is liquidated, a portion of the liquidation fee is allocated to the insurance fund. This appears in your transaction history as an “Insurance clear”.

When a position on Aster is liquidated, a portion of the assets used to maintain the position is deducted as an insurance fee. This fee is charged only when the position is not fully bankrupt. It appears in your transaction history under the label “Insurance clear”.

The insurance fee is calculated based on the applicable liquidation fee rate and the notional value of the liquidated position. You can refer to the Aster trading rules page for the current fee rates.

Aster strongly encourages traders to manage leverage and margin carefully in order to avoid forced liquidation. In periods of extreme volatility, the Aster Insurance Fund may be required to take over liquidation positions directly. When this happens, the takeover is executed at the bankruptcy price, which can be less favorable than the normal liquidation price and may result in greater loss for the trader.

Additional notes:

• Bankruptcy prices may fall outside the contract’s current market range.

• Due to latency or syncing issues, some numerical values may update without notice.

8. How does cross margin affect liquidation

Aster uses cross margin by default. This means all your collateral and unrealized PnL from other positions help support your open trades. This can reduce the chance of liquidation, but it also means all positions share the same risk pool.

9. Does leverage directly affect liquidation risk

Yes. Higher leverage means a smaller buffer between your entry price and your liquidation price. For example, a 50x position is much more likely to be liquidated than a 5x position because the room for price movement is very small.

10. What happens to my collateral after liquidation

After your position is forcibly closed:

• The system uses your collateral to cover losses

• Any remaining collateral stays in your account

If losses exceed collateral, insurance funds or protocol buffers cover the difference.

11. How can I reduce risk of liquidation

You can reduce liquidation risk by:

• Using lower leverage

• Adding more collateral

• Setting a stop loss

• Monitoring funding fees

• Avoiding oversized positions

• Closing positions before high volatility events

If you got any questions, contact us via Discord for further assistance.