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A position can be liquidated if the collateral falls below the maintenance requirement.

When is a position is up for liquidation, it first goes into a pending state, until the next oracle update. During this period, no new positions can be opened or closed. If the position still violates the maintenance margin requirements at the time of the oracle update, liquidation proceeds.

Upon successful liquidation, a liquidation fee is applied. This fee is a percentage of the maintenance requirement at the time of liquidation, subject to maximum and minimum limits. The liquidator (the party who executes the liquidation) is rewarded with this fee. This incentivizes timely and efficient liquidation of under-collateralized positions.

When a position is liquidated, any collateral remaining after deducting losses and fees would be returned to your account.

Ex: A long position is opened on an asset, with a notional value of 5000 USD and the current price of the asset is 1000 USD. The maintenance margin is set at 20% meaning 1000 USDC (20% of 5000 USD). For this position, if the value of collateral falls below 1000 USD, then the position is at risk of a liquidation.