# 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


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