Liquidations

Liquidation is what happens when an account no longer has enough margin to support its open risk. Notional currently supports cross margin and portfolio margin, so eligible collateral, unrealized PnL, open positions, and open orders are evaluated together. A profitable position can help support a losing one, but a large loss can also put the whole account at risk.

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Overview

Notional monitors account health with the cross-margin ratio: $$\text{Cross margin ratio} = \frac{\text{MMR}}{\text{Total margin value}}$$ Lower is healthier. Liquidation can start when total margin value falls below maintenance margin, which is the same as a ratio above 1.0. Maintenance margin is calculated from each open perp position’s mark-price notional: $$\text{MMR}_j = \frac{|\text{size}_j| \cdot \text{mark price}_j}{2 \cdot \text{max leverage}_j}$$ The account’s total maintenance margin is the sum across open positions. Total margin value includes haircut-adjusted collateral value, unrealized PnL, and realized USDC liabilities.

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What Happens During Liquidation

The account is frozen during liquidation. User orders and withdrawals are blocked, but system liquidation orders can still execute. Active TWAPs are canceled so new suborders do not continue while the account is frozen.

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Partial Liquidations

Notional uses partial liquidation when the account is below maintenance but not deeply underwater. Partial liquidation tries to restore the account above the liquidation threshold while preserving as much value as possible. Partial liquidation exits once the account is healthier than the liquidation line. The current exit target is a cross-margin ratio below 0.90. Notional’s partial liquidation is account-level. It is not Hyperliquid’s large-position rule where a fixed percentage of a single oversized position is sent to the book. Today, Notional starts with the largest maintenance-margin position and closes positions sequentially until the account is healthy or needs escalation.

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Full Liquidation

If the account reaches the full-liquidation threshold, or partial liquidation cannot restore health, Notional fully liquidates the account. Full liquidation cancels active orders, closes all positions, and sells non-USDC collateral until liabilities are covered or no recoverable account value remains. Full liquidation uses gradual execution to reduce market impact: Collateral sales are only automatic for collateral that has an executable Hyperliquid spot pair against USDC. If an unsupported collateral asset cannot be sold automatically, liquidation continues for the remaining positions and collateral, and operators must reconcile the retained asset.

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Computing Liquidation Price

Liquidation prices are estimates. In cross margin, the true trigger can move because the whole account contributes to margin health. For one cross-margin position, Notional solves for that position’s mark price at which account health reaches the liquidation threshold: $$\text{total margin value at that mark price} = \text{maintenance margin at that mark price}$$ The shared solver uses: $$\text{liq price} = \frac{\text{other MMR} - \text{total margin value} + \text{size} \cdot \text{mark price}} {\text{size} - |\text{size}| \cdot \text{maintenance rate}}$$ where: $$\text{maintenance rate} = \frac{1}{2 \cdot \text{max leverage}}$$ size is positive for a long and negative for a short. other MMR is the maintenance margin from the rest of the account. total margin value already includes unrealized PnL at the current mark price. The estimate can change after the position is opened because funding, realized losses, collateral prices, other positions, and open orders all change account health. Cross-margin liquidation price is not determined only by the leverage selected for one position.

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What Moves Liquidation Risk

Your liquidation risk can change even if you do not place a new order. Perp margin and liquidation calculations use mark prices. Your liquidation price can therefore move as mark prices, funding, collateral values, open orders, and other positions change. Notional uses fresh Hyperliquid mark prices first for perp margin and liquidation. If a fresh mark is unavailable, the backend can use configured fallback sources. Spot collateral uses a separate collateral-risk price path. Missing or stale collateral prices can block liquidation until pricing is ready, because liquidating against bad collateral data is worse than waiting.