Mark Price and Liquidation Mechanism

What is Mark Price ？

In HKD, there are two different prices for contract trading: the latest price and the mark price. The latest price refers to the most recent transaction price of the contract.

The mark price is calculated by taking the weighted average of prices from various major trading markets. This helps avoid manipulation by individual order books or trading platforms and balances out abnormal price fluctuations during high volatility periods. The mark price is used to calculate unrealized profits and losses and margin rate.

Unrealized Profit and Loss

Because it is difficult to predict the actual realized profit before closing a position, we use the mark price as a reference for calculating unrealized profits and losses to avoid unnecessary forced liquidations.

Margin Rate

The margin rate is used to trigger liquidation. In Cross margin , the margin rate is the same for different currencies; in isolated-margin, different currencies and directions have different margin rate.

Liquidation Trigger Price

The liquidation trigger price is the price at which liquidation is triggered when the margin rate calculated with the latest mark price is less than or equal to the maintenance margin rate + the liquidation fee ratio.

Takeover Price

The takeover price is a special price used in the actual liquidation process. When the market price fluctuates significantly and your order may not be executed in time, the system will take over unfilled orders at the takeover price to prevent unnecessary losses due to unexecuted orders.

The takeover price may be higher or lower than your original order price and is controlled by the liquidation mechanism. It usually does not affect your trades under normal market conditions but may become a critical factor in special market conditions such as extreme volatility or low liquidity.

The takeover price is typically calculated based on the best quotes in the market and the rules of the liquidation mechanism, and your position will be taken over at this price (the price at which your account equity becomes zero) by the system.