Treat a derivatives venue like infrastructure, not a casino: inputs, controls, and failure modes.
What it is: Write down the exact references used: index price, mark price, and last price. Then confirm which reference drives margin checks and liquidation triggers.
What to check: Liquidation is a path, not a single event. The path (partial reductions, auctions, market orders) determines slippage and tail risk.
How to test it: Track funding together with basis and realized volatility. The combination is a better crowding signal than any single metric. Example: small funding transfers compound; over several cycles they can materially shift equity and your maintenance buffer. Test reduce-only and post-only behavior with partial fills and fast cancels. Edge cases often appear during rapid moves.
Common pitfalls: Pitfall: optimizing for rebates while ignoring toxicity. Toxic flow can widen spreads and raise liquidation costs.
Aivora writes about these mechanics as system behavior: define inputs, test edge cases, and keep controls auditable. Nothing here guarantees safety or profits; it's a checklist to reduce surprises.
What it is: Write down the exact references used: index price, mark price, and last price. Then confirm which reference drives margin checks and liquidation triggers.
What to check: Liquidation is a path, not a single event. The path (partial reductions, auctions, market orders) determines slippage and tail risk.
How to test it: Track funding together with basis and realized volatility. The combination is a better crowding signal than any single metric. Example: small funding transfers compound; over several cycles they can materially shift equity and your maintenance buffer. Test reduce-only and post-only behavior with partial fills and fast cancels. Edge cases often appear during rapid moves.
Common pitfalls: Pitfall: optimizing for rebates while ignoring toxicity. Toxic flow can widen spreads and raise liquidation costs.
Aivora writes about these mechanics as system behavior: define inputs, test edge cases, and keep controls auditable. Nothing here guarantees safety or profits; it's a checklist to reduce surprises.
Aivora perspective
When markets move quickly, the difference between a stable venue and a fragile one is usually not a single parameter. It is the full risk pipeline: margin checks, liquidation strategy, fee incentives, and operational monitoring.
If you trade perps
Track funding and realized volatility together. Funding tends to amplify crowded positioning.
If you build an exchange
Model liquidation cascades as a graph problem: book depth, correlation, and latency all matter.
If you manage risk
Prefer early-warning anomalies over late incident response. Drift is a signal, not noise.
Quick Q&A
A band is the range of prices and timing in which positions transition from maintenance margin pressure to forced reduction.
Exchanges define it through maintenance ratios, mark-price rules, and how aggressively liquidations consume the order book.
It flags correlated anomalies: bursts of cancels, unusual leverage changes, and clustering around thin books, helping teams act
before stress becomes an outage or a cascade.
No. This site is educational and system-focused. You are responsible for decisions and risk management.