When you borrow, you lock in collateral (there is the price estimate for collateral); secondary market transactions affect the price of assets for this collateral (they can change): when the price drops below a certain threshold, the LM places the collateral up for auction to compensate for the losses (in portions). If the portion sold is enough to cover collateral, then the sale stops. What happens when the price of assets drops significantly below?
— All further trades are stopped
— Traders are getting rewards— The Liquidation Manager starts the auction to compensate for the losses