Risk tiers
| Tier | Status | Condition | Action |
|---|---|---|---|
| 0 | Low Risk | Effective collateral ≥ initial margin | No immediate action |
| 1 | At Risk | Effective collateral < initial margin and > cancel margin | Monitored |
| 2 | Cancellable | Effective collateral ≤ cancel margin and > maintenance margin | Risk-increasing limit orders can be cancelled |
| 3 | Liquidatable | Effective collateral < maintenance margin | Positions are eligible for market liquidation |
| 4 | BackstopLiquidatable | Effective collateral < backstop threshold | Backstop liquidation can transfer distressed risk |
| 5 | High Risk | Effective collateral < high-risk threshold | ADL eligible |
Liquidation types
Market liquidation
For liquidatable accounts, Phoenix can reduce positions through market execution.- executes against available liquidity
- can be partial
- must improve trader health or fully close the position
- respects market liquidation size limits
Backstop liquidation
If market liquidation is not enough, Phoenix can transfer a distressed position to a backstop account.- the backstop account absorbs the position
- the backstop account then unwinds the risk through normal market execution
- this path is used when orderbook liquidity is insufficient or the account is too distressed for ordinary liquidation
ADL
ADL is the last-resort path.- the losing position is matched against a profitable trader on the opposite side
- the highest-priority profitable trader is selected first
- the match closes or reduces both sides
- profitable traders affected by ADL may realize less profit than expected