Liquidation

A liquidation occurs when a trader’s position moves against them enough that their account equity drops below the maintenance margin — which is set at half of the initial margin at maximum leverage (ranging from 1.25% at 40x to 16.7% at 3x, depending on the asset).

When this threshold is breached, the system attempts to close the entire position via market orders. If the liquidation succeeds (fully or partially) and the equity rises back above maintenance margin, any leftover collateral stays with the trader.

If equity continues falling to below two-thirds of the maintenance margin and liquidation through the order book fails, a backstop liquidation occurs through the Liquidator Vault.

• For cross-margin positions, all positions and collateral are transferred to the vault, reducing account equity to zero.

• For isolated positions, only that specific position and its margin are taken, leaving other funds untouched.

The maintenance margin isn’t returned in backstop events — it serves as a buffer ensuring that liquidations remain profitable for the vault. To avoid this, traders can set stop-loss orders or manually exit before hitting their liquidation price.

Liquidations are based on the mark price, a blend of CEX spot prices and HyENA's internal book data, which offers a fairer, more stable reference during volatility.

In the HyENA system, liquidations go directly to the order book — allowing open participation, avoiding clearance fees, and letting traders retain remaining margin. Large positions are partially liquidated (20%) first, with a 30-second cooldown before full liquidation attempts. HLPe will look to democratize backstop liquidations - its profits go to the community rather than centralized operators.

Liquidation prices are shown when a position is opened, though they may vary slightly with funding changes or PnL fluctuations.

The formula for calculating the liquidation price is:

liq_price = price − side × margin_available / position_size / (1 − l × side)

where

• l = 1 / maintenance leverage

• side = 1 for long, −1 for short

• margin_available depends on whether the position is cross or isolated.

In short, HyENA HIP-3 liquidation model leverages Hyperliquid's native liquidation engine, prioritizing transparency, fairness, and trader protection - allowing market-driven liquidations first, and community-driven backstops only as a last resort.