Risk on leveraged futures trading on the platform is managed via Forced Liquidation process in the Instant Margining System.
Liquidation occurs on the margin account level (of which multiple Contracts can be trading in) when the required Maintenance Margin across contracts exceeds the Equity (Portfolio Value). Upon liquidation, any and all Contracts using margin from that margin account are impacted.
The entire process works in summary as follows:
- Margin Account equity, valued at the Mark Prices on Contract Level, falls below maintenance margin for the Margin account for given user. This kicks off liquidation process. Note: Multiple contracts can share the same margin account, and mark price can and does differ across maturities.
- The system executes an Immediate or Cancel (IoC) close order for any and all contracts in the margin account, at the 0-equity imputed price for each position.
- The orderbook of the given contract(s) may not be liquid enough to absorb the full position size being closed, resulting in unfilled liquidation
- The unfilled liquidation is then assigned to liquidity providers (LPs) / marketmakers who essentially have open ended offers to accept any unfilled liquidaitons (always respecting price time priority, AFTER the orderbook has been swept up to the price that the LP is assigned). This assignment procedure is meant to form a backstop of liquidity to prevent system losses that other platforms address using an insurance fund.
- If the unfilled liquidation can't find a new counterparty in neither the orderbook nor in the PAS assignment, then unwind occurs, which reduces the OI by the remaining size.
Margin rules for Futures are chosen such that a margin shortfall between counterparties should occur no more frequently than approximately once every 10,000 hours (ca. 420 days). This is achieved by choosing the Maintenance Margin requirement such that a 1 hour price move is approximately covered on the 99.99th/ 0.01th percentile.
The following table shows margin requirements and resulting price move protection and leverage for each instrument.
|Bitcoin-Dollar Futures||Ether-Dollar Futures||Litecoin-Dollar Futures||Bitcoin Cash-Dollar Futures||Ripple-Dollar Futures||Ripple-Bitcoin Futures|
|Instrument Type||Inverse Futures||Inverse Futures||Inverse Futures||Inverse Futures||Inverse Futures||Vanilla Futures|
|Mark-to-Market Formula ("Mark Price")||
The permissible band beyond the Mark-to-Market Instrument is a function of how many days are remaining to expiration of the contract. It is 1% for 1 day up to 5% at 140 days, interpolated linearly. This means shorter maturity contracts are ensured to be valued closer to spot than longer maturities. Note that these bands adjust dynamically and serve as an anti-manipulation mechanism.
Note that for perpetual contracts this is limited to 0.50% outside of the real-time spot index.
|Minimum Initial Margin||(1 / Average Entry Price) * Number of Contracts * 2.00%||(1 / Average Entry Price) * Number of Contracts * 2.00%||(1 / Average Entry Price) * Number of Contracts * 2.00%||(1 / Average Entry Price) * Number of Contracts * 2.00%||(1 / Average Entry Price) * Number of Contracts * 2.00%||(1 / Average Entry Price) * Number of Contracts * 2.00%|
|Minimum Maintenance Margin||(Position Size in Contracts / Contract Mark Price) * 1.00%||(Position Size in Contracts / Contract Mark Price) * 1.00%||(Position Size in Contracts / Contract Mark Price) * 1.00%||(Position Size in Contracts / Contract Mark Price) * 1.00%||(Position Size in Contracts / Contract Mark Price) * 1.00%||(Position Size in Contracts / Contract Mark Price) * 1.00%|
|Max Leverage (1/IM)||50x||50x||50x||50x||50x||50x|
|Direct Retail Margin Requirements||Note that all margin requirements for direct Retail members on the platform are 50% Initial Margin and 25% Maintenance Margin, in accordance with ESMA guidelines.|
|Margin Requirements||Note that each Contract Type has its own risk profile with respect to volatility, liquidity, and volume and as such there are higher margin requirements for bigger positions, the levels of which vary across pairs. See the margin schedule for details.|