Understanding Margin and Derivatives Trading

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Introduction to the Agreement

This document outlines the key terms and conditions governing margin and derivatives trading services offered through a designated platform. It is essential to read and understand this information thoroughly before engaging in any trading activities.

The agreement supplements the general Terms of Service and is designed to be read in conjunction with them. In case of any conflict between this document and the general Terms of Service, the provisions outlined here will prevail.

User Classification

Users are classified into different categories based on regulatory guidelines:

This classification determines which services are accessible. It is the user's responsibility to promptly inform the platform of any changes in circumstances that might affect their classification.

Acceptance of Terms

By using these trading services, you accept and agree to be bound by all provisions outlined in this agreement and acknowledge understanding the involved risks.

Available Trading Services

The platform offers several advanced trading products:

Retail investors are restricted to using Margin Trading services exclusively.

Deep Dive into Key Services

Margin Trading Explained
To start margin trading, you must first deposit virtual assets or eligible fiat currency to be held as collateral (margin). This margin acts as security against potential losses incurred while trading. The platform may offer leverage, expressed as a multiple of your deposited assets, to amplify your trading position. The specific amount of leverage offered is at the platform's sole discretion and is subject to applicable laws. It can be withdrawn or varied at any time, with users being notified within a reasonable period.

When a margin trade is executed, interest is charged on the borrowed amount. The current interest rates are detailed on the platform's official website.

Understanding Futures Contracts
A futures contract involves an agreement between two users to buy or sell a specific virtual asset at a predetermined price on a set expiration date. The platform provides contract specifications for each futures product, which may be amended from time to time with notification sent via email, the website, or the platform interface.

Open orders for expired contracts are canceled at settlement. Typically, futures contracts are delivered on Fridays at 12:00 PM (UAE time) during the week of delivery. For certain major tokens like ETH and BTC in cross-margin mode, positions are settled daily at 8:00 AM UTC to enhance the trading experience.

How Options Contracts Work
Options contracts grant the holder the right to exercise the option only on its expiration date. Upon entering an options contract, a user becomes the holder and can either close the position before expiry or wait for the expiration date.

At expiry, contracts that are "in-the-money" are automatically exercised, while "out-of-the-money" contracts are not. The counterparty (the seller) is obligated to settle the transaction in the relevant virtual asset at the agreed-upon price if the holder exercises their right.

The Mechanics of Perpetual Contracts
Perpetual contracts are unique as they lack an expiration date and a settlement price. Instead, they employ a funding rate mechanism to maintain the contract price close to the underlying asset's spot price.

This funding rate is periodically exchanged between users with long and short positions. If the funding rate is positive, long positions pay short positions. If it is negative, short positions pay long positions. The platform is solely responsible for calculating this rate and settling the payments between users every 8 hours (at 04:00, 12:00, and 20:00 UAE time), though the frequency can differ per contract.

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Fees, Taxes, and Payments

Fee Structure

The platform charges fees for opening, closing, and/or liquidating positions. By executing these actions, you agree to incur these costs. Fees may include trading fees, funding fees, and settlement fees. A comprehensive and up-to-date fee schedule is available on the platform's website. The platform reserves the right to update its fee structure periodically.

Tax Obligations

In compliance with applicable laws, the platform may be required to charge users certain taxes, such as Value Added Tax (VAT). Any tax charged will be in addition to the standard fees and commissions and will be detailed in the user's invoice. Tax rates are subject to change.

Trading Mechanics and Account Management

The Trading Account

To use the services, you must fund your trading account with virtual assets or eligible fiat currency. The account provides a real-time order book for the specified virtual assets offered by the platform, though this list of assets can be amended at the platform's discretion.

Three primary trading modes are available:

  1. Spot and Futures Mode: Settlements, margin, and liquidations are isolated to the specific virtual asset being traded.
  2. Multi-Currency Margin Mode: All virtual assets in the account are converted to a USD-equivalent value to serve as a shared margin pool across positions.
  3. Portfolio Margin Mode: Positions with the same underlying asset are grouped into "risk units" for calculating margin requirements holistically.

The Multi-Currency and Portfolio Margin modes are typically restricted to users maintaining a net equity of at least $10,000 in their accounts. Users can also often opt for an "Isolated Margin" mode to restrict the margin allocated to each specific position.

The Trading Process

The process for opening and maintaining a position differs slightly between Margin Trading and Derivative Products but follows a similar core structure.

Opening a Position: Users must provide an Initial Margin to open any position. The required amount can vary. For derivatives, the platform will use its best efforts to match a user's order with a suitable counterparty, though instantaneous matching is not guaranteed.

Maintaining a Position: To keep a position open, users must maintain a Maintenance Margin level. This requirement fluctuates based on position size and market prices. It is the user's sole responsibility to constantly monitor their margin level and account equity to avoid liquidation. The platform will automatically reflect any changes to the maintenance margin requirement on the trading account.

Settlement: Derivative contracts settle according to their specifications. The platform is solely responsible for determining the profit or loss for each user at settlement, and these calculations are considered final and conclusive.

Early Warning System and Liquidation

Your trading account displays a Margin Ratio (equity / maintenance margin), which indicates the account's "health." A higher ratio is better.

The platform provides an Early Warning Notification when this ratio falls below a default threshold of 300%. Users can, at their own risk, configure this threshold to 150% or 200%. This notification is sent via your chosen method of communication. Upon receiving a warning, you are strongly encouraged to deposit more assets to increase your margin ratio and avoid liquidation.

If your margin ratio falls to 100% or below, the platform reserves the right to fully or partially liquidate your account to cover potential losses. Liquidation can involve closing positions, selling assets, and canceling orders. A liquidation fee may be charged.

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The Insurance Fund and Auto-Deleveraging

An Insurance Fund exists to cover negative balances that remain after a user's account is liquidated. However, the platform cannot guarantee that all losses will be covered, especially during extreme market volatility. You may lose more than your initial investment and could owe money to the platform.

If the Insurance Fund depletes by 30% from its daily peak within 8 hours, an Auto-Deleveraging (ADL) system is activated. This system forcibly liquidates the most profitable positions across the platform to recapitalize the Insurance Fund. Profits from these forced liquidations are credited to the affected users, who do not incur trading fees in the process.

Risk Disclosure

Trading with margin and derivatives involves significant risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you, amplifying both gains and losses.

You may be required to deposit additional margin immediately if the market moves against your position. Failure to do so can lead to the liquidation of your positions at a loss, for which you will be solely responsible.

The platform may change margin requirements at short notice due to market volatility, economic news, or changes in applicable laws. It is your responsibility to monitor your account balance and margin levels continuously.

Frequently Asked Questions

Q: What is the main difference between a Futures Contract and a Perpetual Contract?
A: A Futures Contract has a fixed expiration date in the future upon which it settles. A Perpetual Contract has no expiration date and uses a funding rate mechanism to tether its price to the underlying spot market, allowing it to remain open indefinitely.

Q: What happens if I receive an Early Warning Notification?
A: This is an alert that your margin ratio is low and you are at risk of liquidation. You should immediately deposit more virtual assets or fiat currency into your trading account to increase your equity and raise your margin ratio above the required maintenance level.

Q: Can I lose more money than I deposited?
A: Yes. In volatile market conditions, especially when using high leverage, it is possible to lose more than your initial investment. If your account is liquidated and the proceeds are insufficient to cover your losses, you could owe a negative balance to the platform.

Q: How is the Funding Rate for Perpetual Contracts determined?
A: The platform calculates the Funding Rate periodically. It is designed to balance the market. If the rate is positive, long positions pay short positions, encouraging more selling. If negative, short positions pay long positions, encouraging more buying. This helps keep the perpetual contract price aligned with the spot price.

Q: What is Auto-Deleveraging (ADL)?
A: ADL is a last-resort mechanism activated when the Insurance Fund is severely depleted. It automatically liquidates the most profitable positions on the platform in a ranked order to replenish the fund and protect the system from cascading liquidations.

Q: Who is eligible for Portfolio Margin Mode?
A: This advanced mode is typically restricted to users who maintain a significant amount of net equity in their account, often a minimum of $10,000. It allows for more efficient use of capital by evaluating margin requirements across a portfolio of related positions.