> ## Documentation Index
> Fetch the complete documentation index at: https://docs.parquet.exchange/llms.txt
> Use this file to discover all available pages before exploring further.

# Liquidations

> How and why positions get liquidated on Parquet — the maintenance-margin trigger, the equity-based liquidation fee, and what happens off-hours.

Liquidations exist because losing trades eventually run out of collateral. When your position moves against you far enough that the remaining equity can't cover the maintenance margin, the protocol needs to close you out before the loss spills onto liquidity providers. Anyone can trigger a liquidation — there is no privileged operator — so in practice automated bots (keepers) close eligible positions almost instantly.

## When you get liquidated

Your position is liquidatable when its health falls to or below the maintenance margin ratio (see [MMR](/reference/glossary#mmr)):

```
health ≤ MMR_BPS
```

Health is computed from your [effective equity](/reference/glossary#effective-equity), the market's max leverage, and your position size:

```
health         = effective_equity × max_leverage / size
effective_equity = collateral + pnl − funding_charge − borrowing_fee
```

Three numbers to remember:

| Constant        | Value                                                                                                                          |
| --------------- | ------------------------------------------------------------------------------------------------------------------------------ |
| `MMR_BPS`       | **40 bps** (0.4% of position size, venue-wide)                                                                                 |
| `MAX_LEVERAGE`  | **Tiered** — up to 200× (≤ $100K notional) down to 10× (> $1M), same tiers in every session (set by the 50 bps initial margin) |
| Liquidation fee | **20% of remaining equity** at liquidation, capped at equity, split 50/50 between liquidator and insurance fund                |

Liquidation math rounds conservatively (in the protocol's favor) to protect liquidity providers, so the actual trigger sits a hair earlier than a back-of-envelope calculation suggests. Keep a small buffer: watch your margin in the position panel and top up collateral early. See [Margin management](/trade/margin-management) for how to add or remove collateral mid-trade.

<Tip>
  The initial margin is **50 bps** (0.5%), so the most you can *open* is 200×. A fresh 200× position has a **10 bps** margin above its liquidation price (initial 50 − maintenance 40) that the 10 bps open fee fully consumes — so it opens essentially **at** its liquidation point. This is why most traders use much lower leverage — every step down adds real cushion. Maintenance margin is **40 bps** venue-wide.
</Tip>

<Warning>
  **Off-hours price drift.** Parquet trades 24/7, so you can be liquidated overnight or over a weekend. Off-hours pricing comes from an off-exchange reference feed rather than the underlying US equity venues, so the price your position is marked against can drift from where the underlying would actually trade at next-open. Off-hours risk parameters are tighter (the OI cap drops from $5M to $500K and an ADL tail-backstop is armed; the leverage tiers themselves are the same in every session) but the drift risk is real. Size off-hours exposure assuming the off-hours mark may not perfectly track the underlying.
</Warning>

## What the liquidation fee is

When you are liquidated, two payouts happen in one step:

1. **Liquidation fee.** A fee equal to **20% of your remaining equity at liquidation** is taken. It is capped at your equity (it can never exceed what's left) and split 50/50 — half to whoever triggered the liquidation, half to the insurance fund. Because the fee scales with what remains, it shrinks as your equity shrinks, so it cannot by itself push the position into bad debt.
2. **Trader settlement.** Whatever equity is left after the fee — collateral plus realized PnL minus funding and borrow fees — is paid back to the trader's vault.

<Note>
  You don't pay the liquidator out of pocket — it comes out of your remaining equity.
</Note>

## Queue clawback

If you opened a position using collateral drawn from the [LP payout queue](/earn/lp-payout-queue), a liquidation also cancels the matching queued payouts before releasing your collateral, so that queue-funded collateral cannot become a loss for liquidity providers.

<Warning>
  You won't see queue clawback unless you specifically opened a position funded from the payout queue. For ordinary collateral deposits, only the two payouts above apply.
</Warning>