Single-currency margin: cross margin trading

Single-currency margin: In this mode, users can trade across all business lines simultaneously, including spot, margin, expiry futures, perpetual futures, and options. Users only need to transfer assets into the cross margin account. In single-currency cross margin, all trading products settled with the same currency can share the same total margin, and the generated profits and losses can be offset.

In single-currency cross margin, the risks of the positions settled with the same currency will be measured in whole. When the equity of a certain currency is insufficient, it may result in partial liquidation, full liquidation, or equity loss of all the positions settled with this currency. If users want to segregate the risk of each position, isolated margin mode will be a good choice.

Assets

In single-currency margin, the assets will be displayed as below:

Trading rules

In single-currency margin account, users can choose to trade in cross margin mode or isolated margin mode. In cross margin mode, all trading products settled with the same currency can share the same total margin, and the generated profits and losses can be offset. In isolated margin mode, the risk of each position, as well as the profit and loss, are separated.

1. Trading rules for single-currency cross margin mode

1. When users conduct futures, perpetual, options(short positions), and margin transactions in single-currency cross margin mode, the available equity of the currency in the account should be greater than or equal to the amount required for the order.

2. When users conduct spot or options(long positions) transactions in single-currency cross margin mode, the available balance of the currency in the account should be greater than or equal to the amount required for the order.

Note: Available balance refers to the amount of assets that can be used to open isolated positions and perform spot and options (long positions) trading with the single-currency account.

If a user's BTC holdings in single-currency cross margin positions and pending orders are as below:

And if the user conducts the margin trading in single-currency cross margin mode with the holdings as above, the margin verification for placing an order will be as follows:

Then when the user opens a long position with 200 BTC and 5x leverage, the amount of required margin for this order will be 200 / 5 = 40 BTC;

On-hold equity = margin required for futures positions in cross margin mode + pending order margin for futures in cross margin mode + margin required for margin positions in cross margin mode + pending order margin for margin trading in cross margin mode + pending order margin required for isolated margin mode = 10 + 20 + 100 + 200 + 200 = 530 BTC;

Assuming the user's balance in the cross margin account is 700 BTC.

Available equity = Max (0, balance in cross margin account + Unrealized P&L in cross margin positions - In use) = max(0, 700 + 10 + 5 - 530 ) = 185 BTC;

If the BTC available equity > the amount of BTC required for the order, it means the order is placed successfully.

If the user conducts the futures trading in single-currency cross margin mode with the holdings as above, the margin verification for placing an order will be as follows:

If the user longs 100,000 weekly futures contracts with 5x leverage at a price of 10,000 USDT/BTC, the required margin amount = face value * number of contracts * contract multiplier / order price / leverage multiplier = 100000 * 100 * 1 / 10000 / 5 = 200 BTC;

On - hold equity = margin required for futures positions in cross margin mode + pending order margin for futures in cross margin mode + margin required for margin positions in cross margin mode + pending order margin for margin trading in cross margin mode + pending order margin required for isolated margin mode = 10 + 20 +100 +200 + 200 = 530 BTC;

Available equity = Max (0, balance in cross margin account + Unrealized P&L in cross margin positions - In use) = max(0, 700 + 10 + 5 - 530 ) = 185 BTC;

That is, the BTC available margin is less than the amount required for the order, so the order fails.

Trading rules for single-currency cross margin mode

1. Margin positions in cross margin mode

2. If a user trades a certain margin pair in the single-currency cross margin mode, the margin positions will be displayed as below:

2.1.2 Principle of initial margin: both tokens of a pair can be used as margin for long/short positions.

Examples:

1. As to BTC/USDT pair, you can choose either BTC or USDT as margin currency to open long/short margin positions in single-currency cross mode.

2. Now open a long position of 1BTC under 10X leverage. If the user chooses to take BTC as the margin currency, a margin of 0.1 BTC is required (the available equity in single-currency account should be greater than or equal to 0.1 BTC), the filled price is 10,000 USDT/BTC, and 10,000 USDT needs to be borrowed; no currency will be borrowed if the transaction is not filled. No interest is accrued, but the margin will be on-hold.

3. After the transaction is filled, a long position will be opened: the total asset of this position is 1BTC, while its liability is 10,000USDT. The margin of 0.1BTC is in the account balance, and will not be transferred to single-currency margin position asset (It is different from isolated position, where margin for isolated position will be transferred to the position asset).

3. Closing positions

3.1 Position assets and margin currency are the same---use the trading currency as margin to open long, or use the quote currency as margin to open short.

1. Principle of closing positions: Only the available asset can be used for closing a position. Users can close the position when they pay off the liability; Users can also choose whether to use "reduce only" when closing a position.

2. The available asset formula for closing positions:

The main difference from the isolated margin: the available asset can be used for closing the position is the total asset of the isolated margin positions, while in single-currency cross margin mode (where position assets and margin currencies are the same), the available asset that can be used for closing the position may be the sum of total position asset and part of the equity in account balance.

Fundamentally, closing a margin position cannot affect the risks of other positions in a single-currency cross margin mode. When the total equity is greater than or equal to the initial margin required for the account, the available asset for closing a margin position can include the initial margin of this position; when the equity is less than the maintenance margin required for the account, the available asset for closing a margin position can include the maintenance margin of this position.

a) Closing long positions with liability calculated in quote currency:

• Account equity ≥ account initial margin, the available asset for closing margin positions = (|liability + interest| of this margin position) * (1 + Initial margin ratio of this margin position) / mark price

• Account equity < account maintenance margin, the available asset for closing margin positions = (|liability + interest| of this margin position) * (1 + Maintenance margin ratio of this margin position) / mark price

b) Closing short positions with liability calculated in trading currency:

• Account equity ≥ account initial margin, the available asset for closing margin positions = (|liability + interest| of this margin position) * (1 + Initial margin ratio of this margin position) * mark price

• Account equity < account maintenance margin, the available asset for closing margin positions = (|liability + interest| of this position) * (1 + Maintenance margin ratio of this position) * mark price

3. The rules of closing positions are the same as those of isolated positions, except the available asset formula.

3.2 Position assets and margin currencies are different---use the trading currency as margin currency to open short, or use the quote currency as margin currency to open long.

1. Principle of closing positions: only position assets can be used to close a position. If the position assets are sold out, the position will be closed. If the liability is not paid off, the equity in the account will be used to directly pay off the remaining liabilities; Users can choose whether to use "reduce only".

2. The available asset that can be used to close the position = position assets.

2.2 Perpetual/futures in cross margin mode

In single-currency margin mode, perpetual/futures support both Hedge mode and One-way mode, as shown in the following figures:

(1) Hedge mode

(2) One-way mode

2.3 Options in cross margin mode

In single-currency margin mode, you will be able to open long and short positions of options:

Risk assessment

The single-currency margin mode applies a double-layer risk assessment measure. The first layer is "order cancellation by risk control system", and the other is "pre-liquidation verification". This measure ensures a smooth trading experience, prevents the pending orders from being completely canceled, and prevents the positions from being partially or even fully liquidated due to insufficient margin.

Order cancellation by risk control system

If a user's account is assessed as risky but not risky enough to trigger "pre-liquidation verification", the" order cancellation by risk control system" will be executed, and some pending orders will be canceled to ensure the account stays within a safe risk control level, which can prevent the pending orders from being canceled because of a sudden triggering of "pre-liquidation verification".

Rules for "order cancellation by risk control system" in single-currency margin mode

1. When (Available equity of the currency in single-currency account - used balance) < the required maintenance margin for all the positions + the initial margin for the pending orders of opening positions in cross margin mode + the pending orders fees, all the pending orders that will increase the used equity amount will be cancelled.

(Including the opening orders of futures, perpetual, options, and margin in both cross margin and isolated margin mode, as well as the pending orders for selling the currency).

2. When the available balance <0, all open orders inisolated margin mode, pending orders for selling the currency, and options buy orders will be canceled.

Pre-liquidation verification

The liquidation that happens in single-currency margin mode is triggered depending on whether or not the margin level reaches 100%. In the single-currency cross margin mode, the margin level is an indicator calculated from the cross margin account equity and maintenance margin in a certain currency. Generally, the higher the account equity, and the lower the maintenance margin, the lower the risk.

When the margin level of a certain currency in single-currency cross margin mode is < 300%, the system will send a liquidation alert to the account, warning users of the risk of liquidation. 300% is set as the pre-alert parameter, and OKX reserves the right to adjust this parameter according to the actual situation.

When the margin level of a certain currency in single-currency cross margin mode is <= 100%, the system will cancel the orders according to the following rules, that is, order cancellation by pre-liquidation system:

If the margin level is still <= 100% after the orders are canceled, the account will trigger a liquidation.

The partial liquidation process can be divided into three phases. In each stage, the positions to be partially liquidated will be handed over to the liquidation engine at the mark price, and a certain amount of maintenance margin will be charged (It is determined by your position tier, which will make up for the loss of the liquidation engine, and the remaining will be injected into the insurance fund, which will not get additional liquidation fee). The option long position will not be partially liquidated.

Three phases of partial liquidation:

1）First, partial liquidation will start with the long and short reverse positions of the same contract under the Hedge mode.

2. When there is no position described in phase 1), or all positions described in phase 1) are partially liquidated, and the account is not restored to a safe state, 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 the account has not been restored to safety status, the system will try to partially liquidate the remaining unhedged positions, and will give priority to those with the best risk reduction effect. Each time you partially liquidate your position, the position tier will be reduced by one level until the account is safe again.

For example, the current price of futures contract BTC-USD-0925 is 50000 USD/BTC, assuming the account assets are as follows:

The liquidation condition is triggered when the margin level is 93%. After all the pending orders are canceled, the margin level of the position turns 95%. Then the position goes into liquidation status. At this moment, the available equity in the cross margin account is 9.5 BTC, and the maintenance margin is 10 BTC.

The position does not contain the long and short reverse positions of the same contract in the long and short mode, but contains the long and short hedged positions in terms of delta value.

After calculation, the futures BTCUSD0925 will be liquidated by 500 conts of long positions, and the options BTCUSD-20200925-65000-C will be liquidated by 100 conts of short positions. After liquidation, the account equity is 9.4 BTC, and the maintenance margin is 9.6 BTC.

If the account is not restored to a safe state and there is no hedged position in the single currency account (all short positions of BTCUSD-20200925-65000-C are liquidated, and the delta value of all remaining positions is positive), please apply liquidation logic to unhedged positions.