# Counterparty Liquidation

Counterparty Liquidation is the final step taken only when the Insurance Fund cannot accept the bankrupt client’s positions. Binance takes every possible step to avoid counterparty liquidation, and has several features such as Immediate or Cancel Limit Orders (see definition of Immediate or Cancel Order) to minimize the potential impact of any counterparty liquidation when it does occur. Unfortunately, due to the volatility in the Crypto markets, and the high leverage offered to clients, it is not possible to fully avoid this possibility. In order to provide the best possible client experience, we are striving to keep counterparty liquidations to an absolute minimum.

As a trader, your position is at risk of counterparty-liquidation based on an indicator with your priority in the queue. Below is an example of the indicators, from lowest priority to highest priority.

Counterparty-liquidation is done without any market fees, and a notice is immediately sent to the affected client. Clients will be free to re-enter at any time.

The trader’s position in the priority ranking is calculated by both profit and leverage; the formula is presented at the end of this page. More profitable and higher leveraged traders will be liquidated first. Specifically, traders will be ranked by their margin ratio and unrealized PnL as a percentage of their collateral. The precise rank is known as “LeveragePnL” defined as unrealized pnl/collateral multiplied by the margin ratio. The exact formulation is at the end.

From there, traders will be ranked by the LeveragePnlQuantile term; traders at imminent risk of being automatically liquidated will see the appropriate indicator in their UI. If the liquidation occurs, the trader will be sent a notice with the amount and liquidation price. The trader will be able to re-enter immediately and will be ineligible from liquidations for the next 365 days.

#### Calculation of Liquidation Priority Ranking

1. if $$(WalletBalance + UnrealizedProfit) <= 0$$:
if $$(WalletBalance + UnrealizedProfit) > 0$$: