1. Introduction to the New Mechanism
The new Isolated Margin system will adopt a tiered margin ratio based risk management framework. Based on the liquidity of each spot trading pair, the platform’s risk control system will configure a tiered margin requirement table for each market where Isolated Margin Trading is enabled (e.g., the BTC/USDT market; the following calculation example is based on this table). This table defines the required MMR and the maximum allowable leverage corresponding to each liability tier. All spot trading pairs that support Isolated Margin trading and their corresponding tiered margin requirements can be found in the Tiered Margin Calculation .
2. Definitions of Asset Concepts in the New Isolated Margin System
3.Margin Requirements for Liabilities
3.1 Coin Liabilities
Under the tiered margin mode, margin is calculated based on the currency liability. Coin Liabilities = Borrowed + ABS (Negative Balance) + Unsettled Interest; The scenarios that might lead to negative balance in isolated margin trading are as follows:
- Interest deductions causing a negative balance (when Total Assets remain positive)
- Liquidation resulting in a bankruptcy (when Total Assets becomes negative)
Our platform views negative balance as a type of liabilities, the same as the loan borrowed, and it is included in the calculation of initial and maintenance margin requirements for borrowing coins;
Interest is calculated based on the borrowed amount at the top of each hour. If there is no outstanding loan at the hour mark, no interest is deducted. Example: If you borrow 100 USDT at 08:10 and repay it at 08:50, there is no interest deducted at 09:00. For more details, please refer to the Cross Margin Trading Rules .
3.2 Maintenance Margin for Coin Liabilities
Maintenance margin is required for coin liabilities in the tiered margin mechanism. While calculating this maintenance margin, the system will convert the coin liabilities into USDT to see which loan tier you are at and you can check the corresponding maintenance margin requirement. The larger the loan size, the greater the liquidity risk, the higher the maintenance margin required.
Take the first tiered table for example: Assume the current BTC Index Price is 50,000 USDT, and you have a loan of 3 BTC, equivalent to 150,000 USDT, falling in the tier of 100k-500k. In this case, the maintenance margin requirement of this loan of 3 BTC = 100000 × 1% + 50000 × 2% = 1000 + 1000 = 2000;
3.3 Rules of Leverage Adjustment
The max leverage of a trading pair is determined by the loan size of quote currency and base currency (the bigger one shall prevail). investors can customize their ideal leverage within the range of (1, Max Leverage]. The bigger the loan size, the lower the max leverage.
Take the first tiered table for example: Suppose that the index price of BTC is 50000 USDT and you have a loan of 3 BTC. The loan size is 150,000 USDT, falling in the tier of 100k-500k. In this case, the max leverage is 10 and investors can customize the leverage within the range of (1, 10]. If both the base currency and quote currency have liabilities, the loan size for determining the loan tier and the corresponding MMR = Max (liabilities of base currency, liabilities of quote currency).
Take the first tiered table for example: Suppose that the USDT loan size reaches 600k, falling in the loan tier of 500k-1m. The corresponding max leverage is 8.3. The max leverage of borrowing BTC is 10. In this case, the leverage investors can customize falls in the range of (1, 8.3].
3.4 Leverage and Initial Margin
Instead of the limited options of 3x, 5x, 10x in the old version of isolated margin trading, the new isolated margin trading allows investors to customize the leverage. The initial margin ratio required for borrowing both base and quote currencies = 1 / (Custom Leverage - 1). The higher the leverage, the lower the initial margin requirement, the higher the risks and the potential return %. Take the first tiered table for example: Suppose that the index price of BTC is 50000 USDT and you have a loan of 3 BTC. The loan size is 150,000 USDT, falling in the tier of 100k-500k. The max leverage is 10 and investor C sets the leverage as 9x. In this case, the initial margin ratio for borrowing both base and quote currencies = 1 / (9-1). When the USDT value of the loan size of the BTC/USDT trading pair (Max (liabilities of base currency, liabilities of quote currency) exceeds 20m, the max leverage is 1x. In this case, you can no longer increase liabilities. If both the base currency and quote currency have liabilities, the loan size for determining the loan tier and the corresponding MMR = Max (liabilities of base currency, liabilities of quote currency).： Take the first tiered table for example: Suppose that the USDT loan size reaches 600k, falling in the loan tier of 500k-1m. The corresponding max leverage is 8.3. The max leverage of borrowing BTC is 10. In this case, the leverage investors can customize falls in the range of (1, 8.3]. you choose 7x as the leverage and the initial margin ratio for borrowing both base and quote currencies = 1 / (7-1).
3.5 Leverage and Loan Limit
In the tiered margin mechanism, you are allowed to customize leverage as long as it is below the max leverage and there's a corresponding loan limit for each leverage. The lower the leverage, the higher the loan limit.
Take the first tiered table for example: When you select a leverage of 20x for the BTC/USDT market, the loan limit for both BTC and USDT is 100k; When you select a leverage of 15x for the BTC/USDT market, the loan limit for both BTC and USDT is still 100k; When you select a leverage of 8.3x for the BTC/USDT market, the loan limit for both BTC and USDT is improved to 1,000k;
The leverage of 1x is the maximum leverage of the loan tier of over 20,000,000. The loan size of 20,000,000 is the max loan limit set by the platform. Once you have reached this limit, you can no longer borrow any funds. If you want to have a higher loan limit, you can lower the leverage.
Take the first tiered table for example: Initially you select a leverage of 20x and have a loan limit of 100k USDT and borrows a loan of 90k. Due to market volatility, the loan value expands to 120k, surpassing the loan limit of 100k. In this case, you cannot borrow more funds even with a sufficient margin balance. But you can decrease the leverage to 10x or lower to get a loan limit of 500k or more.
The platform imposes an overall loan limit, which also includes Borrowing Rate and Loan Cap based on the investor’s VIP tier.
In conclusion, Borrowable of Base Currency = Min (Account Available Margin / Index Price of Base Currency × (Custom Leverage - 1), Loan Limit / Index Price - Liabilities of Base Currency, Loan Cap according to VIP tiers / Index Price - Liabilities of Base Currency, Simple Earn Pool Available); Borrowable of Quote Currency (USDT) = Min (Account Available Margin × (Custom Leverage - 1), Loan Limit - Liabilities of Quote Currency, Loan Cap according to VIP tiers - Liabilities of Quote Currency, Simple Earn Pool Available);
4. Indicators for Measuring Account Risk
The old version of isolated margin trading uses margin ratio (defined as total assets divided by total liabilities) as an indicator to measure account risk.
Under the Tiered Margin Calculation for Isolated Margin, the account’s MMR will be used as an indicator for measuring account risk; MMR = Net Assets / Maintenance Margin;
Liquidation is triggered when the MMR is less than or equal to 100%;
When liquidation is triggered, the platform will gradually liquidate your assets to repay the loan. Upon completion, 2% of the repaid amount will be collected to replenish the insurance fund and cover any shortfall losses. If all assets are liquidated and the loan still cannot be fully repaid, a shortfall will occur, which will be covered by the insurance fund. In cases of significant shortfall, a manual review process will be initiated. If the shortfall in your Margin Account has not yet been covered, please wait patiently or contact customer support.
Note: The new isolated margin mode will be launched in APP version 6.46.0. If you do not update to this version, you will not be able to adjust the leverage freely, and your account will continue to operate under the old mode. To take full advantage of the improved capital efficiency offered by the new mode, please update your APP to the latest version as soon as possible.
Gate reserves the right to adjust all risk control parameters involved in this article and our risk control team has the right to adjust these parameters based on market conditions. The announcements and real-time parameters shall prevail.
Gate reserves the final right to interpret this document.
