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Tiered maintenance margin ratio rules

BitTap
Updated

11.1 Definition and Mechanism of Liquidation

Forced liquidation occurs when a user's maintenance margin ratio (MMR) falls to 100%, meaning the account's total equity is equal to or less than the required maintenance margin plus any applicable closing fees. The system will then automatically activate risk control procedures to handle the position, including canceling open orders, and partially or fully liquidating positions to ensure risk remains within controllable limits for both the platform and the user.

Liquidation mechanisms vary depending on account type. Different products and services may have distinct liquidation rules. Users are advised to carefully read the applicable terms and conditions. It is recommended to regularly monitor position risks, manage margin allocations appropriately, and replenish funds in a timely manner to avoid passive liquidation.

1.2 Maintenance Margin Requirements

The maintenance margin ratio refers to the minimum margin percentage required to maintain open positions. This ratio dynamically adjusts based on actual account equity, margin mode, position size, and other relevant factors.

A. Margin Modes

  • Isolated Margin Mode: Each position is managed independently, with its own risk and required margin, isolated from other positions.
  • Cross Margin Mode: All positions share account equity and margin, with risk assessed on a portfolio basis.
  • Multi-Currency and Portfolio Margin Mode: Maintenance requirements are determined based on risk models and stress test results to reflect potential losses under extreme conditions.

B. Position Tiers (Risk Layering Mechanism)

  • As position size increases, accounts are assigned to higher risk tiers with higher maintenance margin requirements.
  • This tiered system mitigates systemic risk from large positions and helps control leverage ratios.
  • The platform regularly reviews and adjusts tiering standards, and strictly prohibits users from using multiple accounts to bypass position-based margin thresholds.

Examples of Product Rules:

  • Futures Trading: In isolated mode, position size and tier are calculated per contract direction; in cross mode, total exposure is calculated collectively.
  • Margin Trading: Maintenance margin is based on borrowed amount and token type using a tiered structure.
  • Options Trading: Maintenance margin is tiered by the number of contracts held. Only isolated mode is applicable in portfolio margin accounts.

1.3 Liquidation Fees and Recovery Charges

When an account’s maintenance margin ratio falls to or below 100%, the system will initiate liquidation and apply the following fees:

  • Liquidation Fee:
    • Calculated based on the user’s current fee tier.
    • For options, an additional 12.5% of the option premium is charged.
  • Liquidation Recovery Fee:
    • Compensates for market impact and slippage during liquidation.
    • Net proceeds from all liquidation-related fees are allocated to the platform's risk reserve fund to enhance user protection.

Fee Calculation Examples:

  • Spot and Margin Accounts:
    • Isolated Mode: ABS(debt amount) × asset-tier MMR / pair-tier MMR
    • Multi-Currency Mode: If either asset or liability is denominated in USDT, no fee is charged. Otherwise, fees are based on progressive asset discount tiers.
  • Futures Contracts:
    • Coin-Margined: Contract value × multiplier / mark price × tiered MMR
    • USDT-Margined: Contract value × multiplier × mark price × tiered MMR
  • Options Contracts:
    • Call Options: C × margin coefficient × number of liquidated contracts
    • Put Options: Max(C, C × mark price) × margin coefficient × number of liquidated contracts

    Note: "C" denotes a configuration value.

1.4 Liquidation Execution Process

Once the MMR drops to 100% or below, the system will automatically proceed with liquidation as follows:

  1. Cancel all pending orders requiring additional margin.
  2. Take control of high-risk positions, starting with those with the largest exposure, and begin reducing them.
  3. For cross margin, multi-currency, and portfolio margin accounts:
    • If the liability is non-USDT, liquidation will prioritize the liability side based on available liquidity and tiered risk weights.
    • If the liability is in USDT, the system will liquidate assets based on discount rates in descending order of liquidity.

The platform reserves the right to utilize the risk reserve fund at its sole discretion to cover liquidation losses, but offers no guarantee or compensation for losses incurred.

Risk Warning and Disclaimer

This document is for informational purposes only and does not constitute investment, legal, or tax advice. Digital assets and their derivatives are highly volatile and may result in substantial losses, including total capital loss. Leverage trading amplifies both gains and losses.

Users should carefully assess their financial situation and risk tolerance before engaging in digital asset transactions, especially when using leverage. BitTap bears no responsibility for any losses arising from use of its products. Not all products or promotions are available in all jurisdictions. For details, please refer to the platform’s [Terms of Service] and [Risk Disclosure and Disclaimer].