Risk-Module of Trading System
How the risk module protects the exchange — trader collateral requirements, static and dynamic risk parameters, and margin call handling.
The main functions of the trading system are the execution of clearing obligations and control over the fulfillment of obligations between counterparties in transactions executed on the trading system's platforms.
To maintain the required level of reliability, the risk module controls risk parameters — the requirements placed on trading participants, and the various levels of protection and procedures that prevent defaults among them.
Requirements to traders
To secure transactions and prevent default scenarios, bidders must deposit Collateral. BTC and other cryptocurrencies are accepted as Collateral (the list of accepted currencies will be updated).
The Available indicator
The sufficiency of a trader's deposited Collateral — to maintain the current position and open a new one — is determined using the "Available" indicator. It is calculated from the total Collateral across all open positions, active bids, and P/L.
Risk parameters
Static risk parameters
Parameters that are not changed on a regular basis, and are revised only if necessary:
- Minimum collateral amount.
- Overdraft rates.
- Discount rates when collateral is not in the main currency accepted by the trading system.
- Specification of financial instruments.
Dynamic risk parameters
- Upper and lower limit of the price corridor — adopted to avoid erroneous transactions and excessive volatility.
- Calculated value of an instrument — used to calculate the required minimum level of funds to maintain a position, for funding rate calculation, for estimating the upper and lower limits of the price corridor, and for regulating default procedures among participants, among other uses.
- Other parameters are not disclosed, and are intermediate.
The trading system can change risk parameters both during a suspension of trading, and while trading is live.
Margin call or liquidation
A margin call order cannot be cancelled
Once placed, a margin call order cannot be cancelled by a trader.
The default scenario triggers
The automatic mode for managing a trader's positions and active orders activates only when there is a deficit of the trader's own funds — after a negative result on transactions, or after an increase of the Collateral on the financial instruments in which the trader holds positions.
Active orders are removed
All active orders, including deferred orders, are removed.
A margin call order is placed
If a deficit of own funds remains for maintaining the current position, the system automatically places a margin call order.
Volume and price can be recalculated
If there was not enough volume for immediate execution of the order at its placement price, the special mode of order price recalculation is triggered, and the order's volume is recalculated again at the moment of re-placement.
Margin call order parameters
| Parameter | Value |
|---|---|
| Type | Limit order |
| Instrument | The financial instrument, among the trader's open positions, with the largest ratio of borrowed funds |
| Direction | The counter direction to the current position in that financial instrument |
| Quantity | Sufficient to close the deficit of own funds |
| Price | The best bid or the best offer — whichever leads to immediate execution; the calculated value is accepted if there is no necessary price |
One order per instrument
There may be only one margin call order for a single financial instrument, but several margin call orders for different instruments, if a trader's portfolio contains several financial instruments.