Multi-currency margin mode: cross margin trading

Introduction

After depositing assets to your account, you can trade all instruments in multi-currency margin mode, including spot, margin, expiry futures, perpetual futures, and options. The USD value of your assets is used to calculate margin for placing orders and holding positions. Under auto-borrow mode, if the balance or equity of a certain crypto in your account is insufficient while its equivalent value in USD is sufficient, you can continue selling this crypto through spot trading, or trade the derivatives that are settled in this crypto. When a certain crypto’s equity is less than zero due to being oversold or the loss of contracts that are settled in this crypto, the liability and the corresponding interest of this crypto will be generated automatically.

Under the multi-currency margin mode, the risk is measured in USD. If the user’s overall adjusted equity is sufficient to provide the maintenance margin for all positions in USD, the positions will not be liquidated or reduced. If the adjusted equity is insufficient, all the positions under cross-margin mode will be partially or fully liquidated. Users can isolate the risks by opening positions in isolated margin mode.

Asset fields

Discount rate

Under multi-currency cross-margin mode, cryptocurrencies are measured in USD, and this USD value can be used as margin. Due to the volatility of each crypto, our platform calculates the USD value of each crypto based on discount rates to balance market risks. More information on the discount rates for each crypto can be found here.

Note:
For cryptocurrencies that have a USD index price, the USD price will be used.
For cryptocurrencies that do not have a USD index price but have a USDT spot trading pair, the spot price multiplied by the USDT/USD index price will be used.
For cryptocurrencies that do not have a USDT index price and USDT spot trading pair but have a BTC spot trading pair, the spot price multiplied by the BTC/USD index price will be used.
For cryptocurrencies that do not have a USDT index price, USDT spot trading pair and BTC spot trading pair but have an ETH spot trading pair, the spot price multiplied by the ETH/USD index price will be used.

Trading rules

For multi-currency cross margin mode:

• The value of all cryptocurrencies is measured in USD using different discount rates, and this USD value can provide margin for all instruments.

• Users can decide whether to use auto-borrow mode. When a user turns on auto-borrow mode under multi-currency cross-margin mode, if the adjusted equity is sufficient, the user can sell the assets or trade the derivatives settled in a crypto even if the balance of this crypto is insufficient. The potential borrowing amount of this crypto will increase, and the frozen margin will also increase as a result.

• If the user turns on auto-borrow mode, liability will be automatically generated when the crypto equity is insufficient due to overselling or PnL that is settled in this crypto. The interest generated will be calculated according to the liability of this crypto, and this liability will have an initial margin requirement (IMR) and maintenance margin requirement (MMR).

• If the user turns off auto-borrow mode, only the available balance or equity of the crypto can be used to place orders for spot, expiry futures, perpetual futures, and options under cross-margin mode and isolated mode. However, the account risk is measured by the overall adjusted equity under cross-margin mode, so there may be a situation in which the equity of a certain crypto cannot pay off the loss settled in this crypto. If the account has surplus equity in other cryptocurrencies, and the overall USD value of the account is sufficient, these cryptocurrencies won’t be sold, and the liability will be generated passively. If the liability is within the interest-free limit, no interest will be charged. When the liability of the crypto exceeds the interest-free limit, forced repayment will be triggered. More information on forced repayment can be found here.

Validation for auto-borrow orders in multi-currency cross-margin mode

Users can turn on auto-borrow mode. When a user trades spot, expiry futures, perpetual futures, and options in cross-margin mode, the overall adjusted equity in the account should be greater than or equal to the frozen margin, inclusive of the current order placed.

Adjusted equity is sufficient

Place an order to sell 1 STETH at a price of 1 ETH/STETH (Assuming no trading fees or interest)

Adjusted equity = Crypto equity × Discount rate × USD price of crypto - Loss from spot orders, orders to buy options, and isolated margin open orders - Estimated trading fees from all open orders

= 1 ETH x 3,000 × 0.98 + 100 USDT × 1 + 1 STETH x 3,000 × 0.9 = 5,740 USD

Loss from this spot order = 0

The loss from spot orders is relative to the discount rate of the crypto bought. The lower the discount rate, the larger the loss. When the discount rate of the crypto bought is 1, there is no loss.

Frozen margin inclusive of the current order placed = 0.5 ETH × 3,000 + 50 USDT × 1 = 1,550 USD

Since the adjusted equity is larger than the frozen margin, inclusive of the current order, the current order can be placed successfully.

Adjusted equity is sufficient, but the crypto balance is insufficient

Place an order to sell 1 STETH at a price of 1 ETH/STETH (Assuming no trading fees or interest)

Adjusted equity = Crypto equity × Discount rate × USD price of crypto - Loss from spot orders, orders to buy options, and isolated margin open orders - Estimated trading fees from all open orders

= 1 ETH × 3,000 × 0.98 + 100 USDT × 1 = 3,040 USD

Loss from this spot order = 0

Frozen margin including this open order = 0.5 ETH × 3,000 + 50 USDT × 1 + Initial margin for potential borrowing of STETH = 1,850 USD

• Initial margin requirement (IMR) for potential borrowing of STETH = Total potential borrowing amount x Initial margin requirement (IMR) × USD price of STETH = 1 × 10% × 3,000 = 300 USD (Assuming STETH auto-borrow leverage is set to 10x)

• The total potential borrowing amount is determined by the difference between the available equity of this crypto under cross-margin mode and the frozen amount of the crypto. If the available equity is less than the frozen amount, the difference is the amount of potential borrowing.

Since the adjusted equity is larger than the frozen margin, inclusive of the current order placed, the current order can be placed successfully.

Validation for non auto-borrow orders in multi-currency cross-margin mode

If you want to trade with the available balance but don't want to borrow when opening positions, turn off Auto-borrow in the settings. The adjusted equity in the account should be greater than or equal to the frozen margin inclusive of the current order placed, and the available balance of the crypto should be greater than or equal to the amount required for this order.

Note:

• The available balance is the amount of assets that can be used to trade spot, open isolated positions, and buy options.

• The available balance differs from free margin because the former does not account for PnL generated under cross-margin mode.

Example: A trader has 1 BTC and 10,000 ETH in their account. When the adjusted equity > initial margin:

• The trader can only sell 1 BTC when placing a spot sell order.

• The trader can only use 1 BTC margin when trading expiry, perpetual futures or options.

• The trader can only use 1 BTC to buy options.

Potential borrowing limit and interest-free limit

Potential borrowing = Actual borrowing + Virtual borrowing

• Margin borrowing, borrowing to buy options, and negative floating PnL from open derivative positions are actual borrowing. Actual borrowing will use up your margin tier borrowing limit, main account limit, and the platform’s total lending limit.

• The borrowing used for opening derivative positions is virtual borrowing. Virtual borrowing uses your margin tier borrowing limit but does not use your main account limit and the platform’s total lending limit.

• Potential borrowing can also be incurred under both auto-borrow and non auto-borrow modes.

More information on interest-free limits can be found here.

Risk assessment

Multi-currency margin mode has two levels of risk assessments. The first level is called the order cancellation assessment, and the second level is called the pre-liquidation assessment. This ensures that users can trade smoothly and avoid open orders being canceled completely due to insufficient margin.

Order cancellation assessment

Order cancellation via risk control mechanisms will cancel part of the open order when the trader’s account risk is higher than a certain level but has not yet reached the pre-liquidation risk level. This cancellation will reduce liquidation risk and prevent the user from suddenly reaching the pre-liquidation level and causing all open orders to be canceled.

Rules for assessing order cancellation under multi-currency cross-margin mode:

• When Adjusted margin < Maintenance margin of all positions + Initial margin and fees for opening orders, all the opening orders for futures and options under cross-margin mode will be canceled. If the conditions still meet the requirement after cancellation, then this cancellation will result in a spot trading loss.

• Non-borrow mode: (Available equity - Frozen balance) < Required maintenance margin for all the positions + Initial margin & fees of opening orders when open positions, all open orders that will increase the amount of the frozen margin will be canceled. When available balance < 0, orders to open positions under isolated mode, options buyer orders, and open orders for selling this crypto will be canceled.

• Auto-borrow mode: Actual borrowing > Max borrowing limit, all the orders that increase liability will be canceled (including orders to open positions under isolated mode, options buyer orders, and open orders for selling this crypto). When available balance < 0, orders to open positions under isolated mode will be canceled.

Pre-liquidation assessment

The forced liquidation of multi-currency margin mode is based on whether the margin level reaches 100%.

When the margin level is ≤ 300%, the system will send a warning to reduce the positions and the user should be aware of the liquidation risk. 300% is the warning parameter. OKX reserves the right to adjust this parameter according to the actual situation.

When the margin level is ≤ 100%, the system will cancel orders according to the following rules, known as order cancellation by pre-liquidation:

If the margin level is still ≤ 100% after open orders are canceled, forced liquidation will be triggered.

The forced liquidation process has three phases. In each phase, the liquidated positions will be handed over to the forced liquidation engine at the current mark price, and a corresponding amount of maintenance margin will be charged (the maintenance margin is determined by the liquidation tier and will be used to offset the loss caused by the liquidation engine. The remaining part will be counted into the insurance fund). Long options positions won’t be liquidated.

There are 3 phases of partial liquidation:

1. Liquidation will start with positions of the same contracts in the opposite direction under hedge mode.

2. When there is no position described in phase 1, or all positions described in phase 1 are partially liquidated, and liquidation risks have not been reduced significantly, the system will try to keep the total delta value of the account unchanged while attempting to reduce the overall risk of the account. That is, partially liquidate the long and short hedged positions in terms of delta value (Delta refers to a rate of change in the position value of a contract per change in the index price. When the two changes are in the same direction, the delta is positive. Otherwise, it is negative. The greater the change in the position value of a contract per change in the index price, the greater the absolute value of delta). If multiple positions meet the delta long and short offsetting conditions, the system will first partially liquidate the position with a larger maintenance margin.

3. When there is no position described in 2), or all positions described in 2) are partially liquidated (that is, the total delta value of the account cannot be kept almost unchanged at this time, while the account risk cannot be reduced), and liquidation risks have not been reduced significantly, the system will try to partially liquidate the remaining unhedged positions, and will prioritize positions that can help to reduce liquidation risks the most. Each time you partially liquidate your position, the position tier will be reduced by one level until the liquidation risks have been reduced significantly.

For example, the current price of futures contract BTC-USD-0925 is 50,000 USD/BTC, and we assume the assets allocation of an account is as follows:

The margin level is 93%, triggering the forced liquidation condition. After canceling all open orders, the margin level becomes 95%, entering the liquidation phase. At this point, the total equity in the account is 170,000 USD, with a maintenance margin of 200,000 USD.

Assume that hedge mode is enabled, and there are no opposite positions of the same contract, but there are opposite positions in terms of delta value in the BTCUSD index. The system liquidates 500 long position futures contracts of BTCUSD0925 and -100 short position options contracts BTCUSD-20200925-65000-C. After liquidation, the account equity is 169,000 USD, and the maintenance margin is 180,000 USD.

If the account is still at risk and there are no opposite positions that can hedge each other in BTCUSD (all short positions of BTCUSD-20200626-65000-C are liquidated, and the delta value of the remaining positions is positive), the system will partially liquidate the remaining positions that can’t hedge each other.

There are 500+ contracts of BTCUSD0925 futures remaining. If the position tier was reduced by one, the total equity would become 165,000 USD, with a maintenance margin of 170,000 USD.

If EOSUSD-20200925-6-C option (short position) position tier was reduced by one, the total equity would become 164,000 USD, with a maintenance margin of 165,000 USD.
In summary:

• Reducing BTCUSD futures contracts can decrease equity by 4,000 USD and reduce maintenance margin by 10,000 USD.

• Reducing EOSUSD option positions can decrease equity by 5,000 USD and reduce maintenance margin by 15,000 USD.

Since 10,000 USD is greater than 6,000 USD, priority will be given to reducing your option positions.

If reducing expiry futures contracts does not significantly reduce liquidation risks, the same rules will be followed to select the next position to reduce. When the liquidation results in negative assets, the system will use the insurance fund to offset your negative assets, and a corresponding bankruptcy loss bill will be generated at this time.

This document is provided for informational purposes only. It is not intended to provide any investment, tax, or legal advice, nor should it be considered an offer to purchase, sell, hold or offer any services relating to digital assets. Digital asset holdings, including stablecoins, involve a high degree of risk, can fluctuate greatly, and can even become worthless. Leveraged trading in digital assets magnifies both potential gains and potential losses and could result in the loss of your entire investment. Past performance is not indicative of future results. You should carefully consider whether trading or holding digital assets is suitable for you in light of your financial condition, particularly if considering the use of leverage. You are solely responsible for your trading strategies and decisions, and OKX is not responsible for any potential losses. Not all products and promotions are available in all regions. For more details, please refer to the OKX Terms of Service and Risk & Compliance Disclosure.

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