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4. Why is the fill price (bankruptcy price) different from the liquidation price?

# Why is the fill price (bankruptcy price) different from the liquidation price?

Phemex employs a fair price marking mechanism. This method is also commonly used by many other crypto exchanges to prevent malicious activities or low market liquidity. This is why Phemex uses the mark price instead of the last traded price to avoid liquidations due to low liquidity or manipulation.

There are two types of margin related to an open position.

1. The Initial Margin is the amount or percentage of your funds that you must allocate to open a position.
2. The Maintenance Margin is the amount of funds you must maintain in your account in order to keep your positions open.

The Liquidation Price (based on mark price) is the price level that indicates that your position only has maintenance margin left. When the mark price reaches your liquidation price, your position will be liquidated.

Bankruptcy Price is the price level at which your Maintenance Margin is equal to 0. However, please note that even though our liquidation engine takes over as soon as you reach your liquidation price, your position will actually be close at the bankruptcy price. This means that if you hit your liquidation price, you will lose your entire initial margin.

In the trading history, when you hover your mouse over the liquidation price, we will display the actual bankruptcy price at which the position was closed.

## How is the bankruptcy price calculated?

Let’s use the liquidation of a BTC/USD position as the example:

Cross Margin: Initial Margin = Total Margin

Isolated Margin: Initial Margin = Open Value/Leverage

### Inverse Contract Long

Bankruptcy Value = Open Value + Initial Margin

Bankruptcy Value = Open Value + (Open Value/Leverage)

Bankruptcy Price = (Contract Quantity x Contract Size)/Bankruptcy value

### Inverse Contract Short

Bankruptcy Value = Open Value – Initial Margin

Bankruptcy Value = Open Value – (Open Value/Leverage)

Bankruptcy Price = (Contract Quantity x Contract Size)/Bankruptcy value

### Linear Contract Long

Bankruptcy Value = Open Value– Initial Margin

Bankruptcy Value = Open Value– (Open Value/Leverage)

Bankruptcy Price = Bankruptcy value/(Contract Quantity*Contract Size)

### Linear Contract Short

Bankruptcy Value = Open Value + Initial Margin

Bankruptcy Value = Open Value + (Open Value/Leverage)

Bankruptcy Price = Bankruptcy Value/(Contract Quantity*Contract Size)

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