What actually happens, in order, when a BYDFi USDT-M position hits 100% margin ratio

Most people picture liquidation as one instant where the position vanishes. BYDFi's Help Center lays it out as a sequence, and a couple of steps in it surprise people, especially in cross margin.

The image is the official art from that BYDFi article: a red arrow falling across a candlestick chart over a construction site with two workers in hard hats. No prices in it.

The trigger is margin ratio, not the liquidation price

Liquidation starts when margin ratio reaches 100%. The liquidation price on screen is only a reference. BYDFi's formulas:

• Isolated: margin ratio = (maintenance margin + closing fee) / (position margin + unrealized P&L)
• Cross: margin ratio = (maintenance margin + closing fee) / (wallet balance + bonus - frozen isolated margin + cross unrealized P&L)

So in cross, losses on one position and gains on another all feed the same number.

Step 1: pending orders get cancelled first

• Cross: all pending orders are cancelled, including ones on isolated positions.
• Isolated: pending orders on that pair are cancelled, TP/SL included.

BYDFi's example: FIBO holds a 1.5M BTCUSDT long and has a 1M limit order resting. The limit order is cancelled first, which frees margin and can pull the ratio back.

Step 2: if that's not enough, the position goes

In cross, one liquidation closes every cross position, profitable ones too. That's the part that catches people: a winning trade can be closed because a different one dragged the shared ratio to 100%.

Step 3: the engine works it at the bankruptcy price

The liquidation engine takes over at the bankruptcy price. If it gets a better fill, the leftover goes to the insurance fund as the clearance fee. If it gets a worse fill, the insurance fund covers the gap. Roughly: clearance fee = margin (wallet in cross) + liquidation P&L - liquidation transaction fee. You pay both the normal transaction fee and that clearance fee.

Step 4: negative balances

If the account ends up negative, BYDFi clears it every 10 minutes as long as there are no open positions and nothing has been transferred in.

Things not to rely on

• Email margin calls are not guaranteed to arrive.
• Position limits apply, and splitting things up to get around them isn't allowed.

The practical takeaway

Watch margin ratio, not the liquidation price. And if you run cross, remember a resting order you forgot about or a winning position you like are both part of the same pool.