Liquidation
A position is liquidatable once the oracle mid reaches its bust price. From then on you cannot close it yourself: it can only be liquidated. A close request that fills on a liquidatable position is settled as a liquidation.
Who liquidates
- Keepers first. Parchment's keepers liquidate right away, at a fresh oracle price.
- Anyone, after flagging and a grace period. Anyone else has two steps:
- First, someone flags the position on chain as liquidatable. The flag needs a fresh oracle price at or past the bust price. The grace period starts at that flag, not at the moment the price first crossed.
- Then they wait out the grace period: 30 seconds at launch. If any fresh price seen in that time shows the position recovered, the flag is cleared, and a new flag starts the wait again. Once the grace period has passed with the flag still standing, anyone can liquidate.
Anyone can liquidate on chain. The public API does not build liquidation transactions for outsiders; you build them yourself.
Liquidations keep running while markets are paused. Only switching off a market's price feed stops them.
What happens to your margin
You lose your locked margin. From it:
- the liquidator gets a bounty of 1% of the margin, capped at $5,
- the rest goes to the house pool (or to the payout queue when one is waiting).
If you or your delegate (even an expired one) liquidate your own position, no bounty is paid and no PARCHMENT is earned.
Session force-close
A position past its bust price at a session close snapshot, on any market, is liquidated instead of closed. If someone other than you, your delegate or Parchment's keeper does that before the 30-second grace after a liquidation flag has passed, no bounty is paid; it goes to the pool with the rest of the margin.
PARCHMENT on liquidation
A liquidation still earns PARCHMENT:
| Liquidated by | Loss counted for PARCHMENT |
|---|---|
| Parchment's keeper | Your whole locked margin; nothing if the position was a wash |
| Anyone else (including an early session force-close) | Your real price loss at the liquidation price, capped at your margin minus the full bounty; nothing if the position was a wash |
| Yourself or your delegate | Nothing |
The PARCHMENT is not minted in the liquidation transaction. Your liquidation loss is parked on your account and you claim it from the Token page in the app. After that it follows the normal 7-day lock and 30-day vest.
Parchment is switching on automatic credit after launch. Then Parchment's keeper credits parked liquidation losses for you, about every 5 minutes. Anyone can send this credit, and the PARCHMENT always goes into your own lock and vest, never to the sender. Once that is on, the Token page shows a one-line notice, PARCHMENT being added to your lock, instead of the claim card, and offers Claim now only if the loss is still parked after about 15 minutes (for example while loss mints are paused).