> ## Documentation Index
> Fetch the complete documentation index at: https://docs.roxom.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Liquidation Process Steps

> Roxom’s liquidation engine is designed to close positions safely, predictably, and with minimal market disruption.

* **Step 1: Cancel Open Orders**

  The very first action taken by the liquidation engine is to **cancel all open orders** for the same instrument:

  * All limit orders
  * All stop orders
  * Any resting order that could increase position size or margin usage

  This step **frees up reserved margin** and ensures the position cannot grow further during the liquidation process.
* **Step 2: Position Status Change to Liquidation**

  Setting the status to Liquidation officially triggers the liquidation pipeline and prevents normal trading actions on that position.
* **Step 3: Creation of the Liquidation Order**

  This step is to create a **liquidation limit order** with type liquidation. **Key properties of this order:**

  * Placed exactly at the bankruptcy price
  * Behaves like a normal limit order inside the order book
  * Can be fully or partially filled
* **Step 4: Execution Process**

  The liquidation order enters the order book and waits to be matched:

  * **If liquidity is available at bankruptcy price:**\
    The order fills immediately or progressively.
  * **If liquidity is scarce:**\
    The order may sit in the order book and fill slowly.
* **Step 5: Liquidation Outcomes**

  If the order is fully filled:

  * The position is closed
  * Any execution **better than bankruptcy** sends surplus to the **Insurance Fund**

  If only part of the order fills:

  * The position size decreases by the filled amount
  * The liquidation order remains active
  * The engine continues to attempt to fill the remainder over time

  This continues until:

  * The entire position is closed, or
  * The system determines the order cannot fill at bankruptcy price

  If the order **cannot** fill at bankruptcy price:

  * The system checks the **Insurance Fund**
  * If the fund cannot cover the shortfall → **ADL activates**
  * ADL then redistributes the remaining loss to high-ranked traders on the opposite side

This approach ensures liquidations are executed efficiently while minimizing market disruption. *For post-liquidation outcomes and handlings, see* [*Post-Trade Risk Management*](../risk-controls/post-trade-risk-management)*.*