Risk
Phoenix uses a tiered risk classification system:| Tier | Status | Condition | Action |
|---|---|---|---|
| 0 | Low Risk | Collateral ≥ Initial Margin | No immediate action |
| 1 | At Risk | Collateral < Initial Margin but > Cancel Margin | Monitored |
| 2 | Cancellable | Collateral ≤ Cancel Margin but > Maintenance Margin | Risk increasing limit orders can be permissionlessly cancelled |
| 2 | Liquidatable | Collateral < Maintenance Margin | All open positions are eligible for liquidation via market order |
| 3 | Backstop | Collateral < Backstop threshold | Backstop liquidation to the insurance fund |
| 4 | High Risk | Collateral < High Risk Threshold | ADL Eligible |
Liquidation Types
Atomic Liquidation
For positions in Tier 2:- Market orders executed against the orderbook
- Must improve trader health or fully close position
- Respects maximum liquidation size limits
Backstop Liquidation
For positions in Tier 3:- Position transferred to the insurance fund, with a haircut applied to the trader’s remaining collateral
- Haircut taken from remaining collateral as compensation
- Used when orderbook liquidity is insufficient
ADL
For positions in Tier 4:- Underwater (losing) positions are closed at bankruptcy prices by reducing/closing matching profitable positions on the opposite side. Profitable traders affected by ADL
may realize lower profits than expected. - ADL activates when the insurance fund is no longer able to take on large underwater positions, with a small buffer.