Margin and Collateral Balance Management

To provide users with more flexibility when managing their margin and collateral balance, the Derivatives Wallet is now accepting additional virtual assets for deposits as collateral.

The primary collateral asset for the Derivatives Wallet will remain as USDC, which will hold a collateral weight of 1. However, the wallet will now also accept USDT and DAI as secondary collaterals, which will both hold a collateral weight of 0.975.

The Derivatives Wallet may support additional virtual assets as primary or secondary collateral in the future.

Margin Balance = Total Collateral Balance + Unrealized PnL – Fees

Total Collateral Balance (USD) = Σ (Coin Balance × Collateral Weight × Coin Index Price)

Automatic Conversion

To help avoid unnecessary liquidations, the Exchange will automatically convert secondary collateral into USDC when one of the following conditions are met:

• USDC Balance + Session Unrealized PnL < 0 , and Absolute( (USDC Balance + Unrealized PnL) / (Total Collateral Balance + Min(0, Session Unrealized PnL)) ) > 4

• USDC Balance + Session Unrealized PnL < - 30,000

When an automatic conversion is triggered, the required amount of secondary collateral will be converted into USDC so that the triggering conditions are no longer true. Conversion for each collateral asset will be carried out in a single transaction.

Conversion Priority

When an automatic conversion is triggered, the asset with the highest conversion priority (1 being the highest) will be converted back to the primary collateral first followed by the asset with the next highest conversion priority, and so on and so forth until the amount of USDC required from the conversion is reached.

Conversion Calculation

The amount of USDC that’s required from the conversion (amountUSDC, Required) is the smaller of:

OR

The amount of secondary collateral that will be converted into USDC is:

Let

The buffer, e is added to the conversion calculation to avoid boundary conditions. e is 1%, which means the conversion amount will be slightly more than what’s required.

Manual Conversion

Users can also manually convert secondary collateral assets into USDC from their Derivatives Wallet by clicking on the Convert button and filling out the Conversion prompt order window.

Slippage Tolerance

The slippage tolerance allows a user to specify a % tolerance for the conversion so that if the conversion index price deviates unfavorably above the specified tolerance %, the conversion will be canceled.

Conversion Fees

A conversion rate of 0.4% will be applied on the converted secondary collateral amount for both manual and automatic conversions.

Conversion Fee = Amount of Collateral Converted x Conversion Rate (0.4%)

Transactions

Users can view their conversion history by clicking on the Transactions tab from the Derivatives Wallet and filtering the Transaction Type column to Automatic_Conversion or Manual_Conversion. Each conversion will be displayed in 2 separate entries, one for the debit amount and the other for the credit amount.

Collateral Withdrawals

ValueC = Total Collateral Balance (USD) - Initial Margin + MIN ( Session Unrealized PL, 0) - MAX (Session Realized PL, 0)

The amount of USDC that’s available for withdrawal is the MIN (USDC Balance, ValueC).

If the USDC available for withdrawal is greater than or equal to zero, then the user can withdraw any other collateral up to the corresponding maximum balance of the collateral currency, provided that the Total Collateral Balance post-withdrawal is higher than the Initial Margin required for the user’s positions and open orders.

ValueT = ValueC * Coin Index Price

The amount of USDT available for withdrawal is the Min(USDT Balance, ValueT)

Deposit Limit

Deposits into the Derivatives Wallet will need to meet the below limit condition:

Total balance of USDC and USDT <= 10 mil

Scenario 1: USDC Balance < -30k

Assuming the USDC balance is -50000 and that there is no session unrealized PnL, an automatic conversion will be triggered.

The required USDC amount: (50000-30000) x 1.01 = 20200.

The required USDC amount including fees: 20200 ÷ (1-0.3%) = 20260.78234

* Assuming the conversion rate is 0.3%, the buffer is 1% and the USDC/USDT index price is 1.001.

Note: Total collateral balance goes up as USDC balance increases

Scenario 2: USDC Balance + Session Unrealized PnL < 0 , and Absolute( (USDC Balance + Unrealized PnL) / (Total Collateral Balance + Min(0, Session Unrealized PnL)) ) > 4

Assuming the USDC balance is -1, USDT balance is 1100 and the session unrealized PnL is -1000, an auto-conversion will be triggered because abs( -1 - 1000) ÷ (1072.5725 - 1000) = -1001 ÷ 72.5725 = 13.793, which is larger than 4.

The required USDC amount: {abs(-1 - 1000) - 4 x (1072.5725-1000)} x 1.01 = 710.71 x 1.01 = 717.8171

The required USDC amount including fees: 717.8171 ÷ (1-0.3%) = 719.97703

* Assuming the conversion rate is 0.3%, the buffer is 1% and the USDC/USDT index price is 1.001.

Note: Total collateral balance goes up as USDC balance increases.

Scenario 3: USDC Balance < -30k, USDT and DAI

Assuming the USDC balance is -50000 and that there is no session unrealized PnL, an automatic conversion will be triggered and the required USDC amount will be:

First Conversion (USDC)

The required USDC amount: 14969.955

The required USDC amount including fees: 14969.955 ÷ (1-0.3%) = 15015

Second Conversion (DAI)

The required USDC amount: abs(50000 - 14969.955- 30000) x 1.01 = 5080.3454

The required USDC amount including fees: 5080.3454 ÷ (1-0.3%) = 5095.63234

* Assuming the conversion rate is 0.3% and the USDC/USDT and USDC/DAI index prices are both 1.001.

Note: Total collateral balance goes up as USDC balance increases / After Conversion Balance is also same as Scenario 1