suppose in futures market A goes long and B goes short. Later B is liquidated due to marginal call, but now there is no C who is there to buy the position of B.
So technically the exchange is holding on to a losing trade and does not have enough funds to Pay the further gains of A.
How is this risk managed? this question becomes inherently important while trading illiquid options
When B is liquidated, exchange doesn’t just sell to air. It needs someone to buy.
If no one’s there, it sells at whatever shitty price someone is ready to take.
But still even liquidation needs a buyer. No buyer, no trade.