As the underlying asset moves a given position can break the collateralization rule. Having positions with low amounts of collateral presents risks to the system. To dissipate this risk trades can be liquidated by anyone.
Users that send liquidation transactions to close at-risk positions receive a liquidator fee for their service which is a floating percentage of the remaining collateral in the trade. Currently, the percentage that liquidators receive is 30% of the remaining collateral up to a maximum (currently set to 500 USDC). This rate will very likely lower as a market equilibrium is established but starting higher represents a better margin of safety for the system as a whole. 5% of the remaining collateral gets sent to liquidity providers as an additional fee for bearing risk. The remaining 65% of the collateral is returned to the trade initiator.
Currently, a trade will be liquidated if it falls below 5% collateral. This parameter can change based on a governance vote.
Trades are liquidated when they pass their liquidation price. The price used for liquidations is not the Mark Price but rather the Index Price. This price does not change based on activity on Futureswap but rather the underlying asset.