💵Collateral and Cross-Margin Accounts

Introduction to Cross-Margin on PriveX

PriveX employs a cross-margin mechanism as a cornerstone of its trading system. This approach consolidates liabilities across a user's entire trading account, allowing for margin offset between positions. Essentially, your entire portfolio acts as collateral for multiple open positions, significantly enhancing your account's capital efficiency.

Note: While isolated margin accounts are planned for future versions, traders can currently create single-position sub-accounts to isolate margin if needed.

Understanding Collateral on PriveX

USDC Deposits

Before initiating trades, users must deposit USDC as collateral. This ensures that traders have sufficient funds to cover potential losses.

Note: Solvers also deposit equivalent USDC as collateral into the bilateral trade agreements between trader and solver, creating perfectly symmetrical agreements. All trades are settled in USDC.

Credit Valuation Adjustment (CVA)

CVA is a penalty applied to either the trader or solver upon liquidation. This penalty is paid to the non-liquidated party, serving as an incentive to maintain balanced positions and providing a form of liquidation insurance.

Margin Types Explained

Isolated Margin

• Limits liability to the initial margin posted for a single position

• Often used for speculative, volatile positions

• Popular choice for perpetuals trading on various exchanges

Cross-Margin

• Shares liabilities from multiple positions across an account

• Offsets margins between positions

• Reduces margin requirements by considering overall portfolio risk

• Minimizes the risk of single-position liquidations

• Requires lower initial margins

Margin Examples

Isolated Margin Example

A trader has 20,000 USDC on PriveX. They open a BTC perpetual position worth 50,000 USDC on 10X leverage, using 5,000 USDC as collateral in an isolated sub-account. If this position is liquidated, only the 5,000 USDC initial margin in the sub-account is at risk, leaving the remaining 15,000 USDC in other sub-accounts unaffected.

Note: To isolate collateral on PriveX, use distinct sub-accounts for each position you wish to isolate.

Cross-Margin Example

A trader has 20,000 USDC on PriveX. They open a BTC perpetual position worth 50,000 USDC and an ETH perpetual position worth 30,000 USDC. With cross-margin, both positions share the 20,000 USDC as collateral. If the BTC position underperforms but the ETH position performs well, the profit from the ETH position can help maintain the required margin level for the BTC position, potentially preventing early liquidation.

Benefits of Cross-Margin

1. Enhanced Portfolio Capital Efficiency: The entire portfolio serves as collateral, reducing total margin requirements and enabling more trading activity with the same capital.

2. Lower Margin Requirements: Cross-margin accounts typically require lower margin, benefiting both sophisticated and retail traders.

3. Automatic Risk Management: PriveX automatically calculates and transfers margin between open positions to maintain required levels, especially helpful during volatile market conditions.

4. Risk/Reward Optimization: Traders can adjust leverage across positions to suit their risk preferences.

5. Portfolio Margining: Unrealized profits from one position can offset the margin requirements of another, helping prevent liquidation.

Simplified Account Management

Unified Interface

PriveX offers a single, user-friendly interface where traders can easily:

• Monitor and manage all open positions

• Assess overall risk

• Make informed trading decisions

Real-Time Updates

The platform provides real-time updates on:

• Market conditions

• Portfolio performance

This feature helps traders respond promptly to market changes.

Automated Calculations

All necessary calculations related to margin requirements and potential profits or losses are automatically performed and displayed, simplifying the trading process for users.

Managing Portfolio Risk

Visual Risk Indicators

PriveX visually displays risk levels associated with your portfolio, providing clear indicators to help you understand when to take action to prevent liquidation.

Dynamic Adjustments

The platform automatically adjusts to market conditions, providing real-time feedback on the risk levels associated with each open position.

Proactive Notifications

Traders receive immediate notifications on the front-end when risk levels increase, allowing for timely intervention to adjust positions or add collateral.

Conclusion

PriveX's cross-margin account system is designed for efficient and secure trading, offering lower margin requirements, automatic risk management, and simplified account management. These features, combined with PriveX's innovative intent-based architecture and future privacy enhancements through COTI integration, allow traders to navigate the market confidently while optimizing risk and reward.