Leverage-Based Position Limits & Tiered Maintenance Margin on CoinDCX: Explained

To improve risk management in crypto futures trading, we are implementing caps on position and order size based on leverage chosen by the user. Higher leverage allows lower position sizes to prevent excessive risk, while larger position sizes are available at lower leverages.

Additionally, we are introducing a Tiered Maintenance Margin system to ensure users have adequate cushion to manage their positions. This approach keeps the maintenance margin required for positions as low as possible.

Tiered Maintenance Margin: Explained Through an Example

For every market, there are defined position sizes that the users can hold at a particular leverage and the maintenance margin that applies to these position sizes. Let’s consider the below sample structure for BTCUSDT pair: 

Tier	Position Size in USDT (Including Open Orders)	Maximum Leverage	Maintenance Margin Percentage
1	0 – 50,000	25x	1.5%
2	50,000 – 100K	20x	2%
3	100K – 500K	15x	3%
4	500K – 1M	10x	5%
5	1M – 5M	8x	6%
6	5M – 15M	5x	10%

Consider the following scenario:

• Let’s say you have an active position in BTCUSDT at 13x leverage where the current position size is 120K USDT.
• You also have an open order to add to your position where the order size is 80K USDT
• Now you want to further place another order to add to your current position at the same leverage.

Note: Maximum Position size (including open orders) that is allowed at 13X leverage = 500K USDT

Maximum allowed order size for the new order to add to the position is thus: 

= Max Position Size allowed – Current Position Size – Open order size to add to the position

= 500K – 120K – 80K

= 300K

Tiered Maintenance Margin Calculation

Maintenance margin is a key input that governs the liquidation price of a position. A higher maintenance margin means a riskier liquidation price which in turn means that the user has a lower cushion to manage their positions. In order to ensure that the maintenance margin is kept as low as possible, we have introduced a Tiered Maintenance Margin system. Let’s try to understand this better considering the above example –

Let’s assume that the open order is filled and now the current position size is 200K USDT. As per the table, for the first 50K of the position maintenance margin applicable is 1.5%, for the next 50K – 2%, and for the remaining 100K – 3%.

Maintenance Margin = 50K * 1% + 50K * 2% + 100K * 3% = 500 + 1000 + 3000 USDT = 4500 USDT

Maintenance Margin % = Maintenance Margin/Position Size = 4500/200000 * 100 % = 2.3%

Hence with a tiered maintenance margin, a significantly lower maintenance margin of 2.3% is applied as against 3% in the absence of tiering.

Know More: Cross Margin for Crypto Futures Trading on CoinDCX

Understanding Margin Adjustments and Leverage Changes

In order to ensure that position size limits are not breached at the leverage you are trading, the leverage of open positions, open orders, and new orders being placed for a particular market must stay in sync. To ensure this there are a few enhancements made to the existing flows, details of which are mentioned in the scenarios below: 

Scenario 1 – Why do I need to add/remove margin money when changing the leverage on the order form?

• When you change the leverage on the order form while holding an active position or open orders in a particular market, you will need to add or remove the margin. This requirement depends on whether you are increasing or decreasing leverage. This adjustment ensures that the leverage of your position and open orders remain in sync with the new leverage setting of your order.

Scenario 2 – I adjusted my position by adding/removing margin money from the Add/Remove Margin or Liquidation Price change, but the leverage didn’t update on my position card.

• When you add or remove margin through the Add/Remove Margin flow or the Liquidation Price change flow, the effects are directly reflected in the updated liquidation price on your position card. The leverage displayed on your position card represents the leverage that will be applied to all futures orders and the position.

Scenario 3 – I’m unable to remove margin money from my active position.

• To ensure that position size limits are not exceeded while adjusting the position, certain checks have been implemented when removing the margin. However, you can still achieve the desired outcome by adjusting the position through changing leverage. Finer adjustments to leverage are also supported by interacting with the +/- buttons, which allow you to adjust leverage in step sizes of 0.1. This ensures compliance with the position size limits while providing the flexibility to manage your margin and leverage effectively.

Additional Read: Futures Wallet Feature Now on CoinDCX App