In futures trading, it comes as no surprise that margin is the most frequently-heard term because it is closely related to the size of your position and the probability of forced liquidation. The most important notions about margin are the Initial Margin and the Maintenance Margin. The former refers to the margin needed for opening a position, while the latter refers to the minimum amount of margin required to keep your position open.

The Maintenance Margin Rate determines whether forced liquidation will be triggered. When your Margin Rate is lower than the Maintenance Margin Rate required for your current position + the liquidation fee, forced liquidation will be automatically triggered. Under the Isolated Margin mode, Margin Rate = (Initial Margin + Increased Margin - Decreased Margin + Unrealized PNL)/Open Value; under the Cross Margin mode, Margin Rate = (Available Margin + Initial Margin + Increased Margin - Decreased Margin + Unrealized PNL)/Open Value.

You can find out about the Margin Rate through the formulas provided above. So where can we check the Maintenance Margin Rate?

Through the futures market information available on the CoinEx website, you can stay updated on the latest Maintenance Margin Rate of each contract traded on the platform.

We can tell that the Maintenance Margin Rate depends on the Position Level because CoinEx uses a tiered system of Maintenance Margin Rate - As your position becomes larger, the Maintenance Margin Rate increases, and the Max. Leverage decreases.

Such a system is designed to prevent shocks to market liquidity as a result of the forced liquidation of huge positions. Here is why: When a huge position is forced-liquidated, a large order appears on the market and it might not be settled at the liquidation price because the platform may struggle to match it with other orders due to insufficient market liquidity.

If such a position was eventually sold at a price way lower than the liquidation price, the relevant loss may exceed the margin previously added, which would bring a substantial bankruptcy loss. Although such losses are covered by CoinEx’s Insurance Fund, losses arising from the bankruptcy of huge positions at high leverage may exceed the budget. If the Insurance Fund cannot cover the bankruptcy loss, the forced liquidation of the position will be processed by Auto-Deleveraging (ADL), and the positions of other CoinEx users might be reduced.

To better protect users’ interest and to avoid ADL as a result of the forced liquidation of huge positions, CoinEx has introduced a tiered system of Maintenance Margin Rate, Min. Initial Margin, and Max. Leverage based on different Position Levels. By lowering the Max. Leverage while increasing the Maintenance Margin Rate of huge positions, holders of such positions will have to pay significantly higher margins, which makes sure that the bankruptcy losses (if any) will be covered by the margin in the event of forced liquidation.

For example, if your BTCUSDT contract position is worth 10 BTC, your Position Level would fall into 0 – 20 BTC, which means that the corresponding Max. Leverage and Maintenance Margin Rate would be 100x and 0.50%, respectively; if your BTCUSDT contract position is worth 20 BTC, however, the corresponding Max. Leverage and Maintenance Margin Rate would be 20x and 2.00%, respectively.

This tiered system calculates the worth of the position of each contract in each direction. When investors hold positions for both directions (long/short), the Position Level will be determined by the highest value of the two directions. For instance, if you longed the BTCUSDT contract for 10 BTC and shorted the contract for 30BTC, your Position Level would be 20.0001 - 50 BTC because the highest value stands at 30 BTC, which means that the corresponding Maintenance Margin Rate would be 1.00%.

The tiered system of Maintenance Margin Rate is an effective approach to risk control for the prevention of huge bankruptcy losses. With such a system, ADL is less likely to be triggered, which will better protect the interests of all users. Meanwhile, under this tiered system, the Maintenance Margin Rate of different contracts also varies. As such, you can check the relevant figures on the Futures page on the CoinEx website before starting a position.

Why Does My Maintenance Margin Rate Increase When I Expand My Position?