Ladder Maintenance Margin Rate

Maintenance Margin Rate

The margin rate measures the health and risk of a trader’s position. The maintenance margin rate is the minimum required margin needed to keep a position open.

• If a trader’s margin rate falls to or below the maintenance margin rate, the position is at risk of being forcibly liquidated by the system.

• To ensure fairness and reduce forced liquidations caused by short-term volatility or manipulation, the marked price (not the last trade price) is used to calculate the margin rate.

Ladder Maintenance Margin Mechanism

To prevent large positions from causing sudden market disruption during liquidation, the platform uses a laddered margin system.

Key Concepts:

• Each ladder tier defines:

  • A specific range of position sizes

  • A corresponding maintenance margin rate

• The larger the position, the higher the required maintenance margin rate.

• This discourages excessive leverage and encourages a gradual scaling of risk.

How It Works:

• When the system detects that the margin rate is below the required maintenance margin for the current tier, it initiates a reduction in the position.

• The system will reduce the position down to the maximum allowed size of the next lower tier.

• This allows for partial risk mitigation without triggering full liquidation.

$$\text{If } \text{Margin Rate} < \text{MMR}_{\text{current tier}} \Rightarrow \text{Reduce to next tier's max position}$$

Where:

• MMR: Maintenance Margin Rate

• The position is reduced until it meets the margin requirement for a lower-risk tier.

Benefits of the Ladder System

• Protects market liquidity from sudden liquidation events

• Minimizes user losses from full liquidation

• Encourages responsible leverage usage for larger traders