🧲Cross Margin Account Structure
Cross Margin on ZKX Protocol: ZKX employs a cross-margin system as the default setting for its trading accounts. In this structure, the entire trading portfolio acts as a unified collateral pool to support all the open positions in an account. This flexible approach contrasts with isolated margin models traditionally found on other Centralized and Decentralized exchanges.
Isolated Margin vs. Cross Margin
Below is the distinction between these two margin approaches:
1. Isolated Margin
Positions are individually collateralized. Liabilities and risks are compartmentalized within each position. A loss in one position does not directly impact other open positions.
Isolated Margining Example:
Charlie holds a balance of 15,000 USDC. He's interested in opening a long position in an ETH perpetual contract. The position's value is 30,000 USDC, and Charlie wants to use 10x leverage. He decides to use an isolated margin and allocates 3,000 USDC as collateral for this position.
If the market moves against Charlie's ETH position and triggers a liquidation, only his 3,000 USDC used for the position's initial margin would be at risk.
The rest of Charlie’s balance, 12,000 USDC, remains secure and is not impacted by the liquidation of this specific position.
2. Cross Margin
Trader Deposits and balances are dynamically combined across an entire account’s portfolio to offset margin requirements between positions. In cross margin all open positions, including realized and unrealized profits and losses (PnL), collectively contribute to the available margin balance.
Benefits of Cross Margin:
We choose cross-margin to empower traders with several advantages:
Enhanced Capital Efficiency: Maximizes the impact of capital. Traders can Open positions with lower capital due to shared margin contributions across the entire portfolio. Gains in one position can help to offset potential losses in another.
Reduces Liquidation Risk: ZKX actively calculates the overall portfolio health of an account and considers the available margin in any given account to uphold adequate levels across all positions. This approach limits the risk of liquidation caused due to losses in a single position.
Portfolio-wide Margin Adjustment: Unrealized profits boost the trading power of the portfolio– they can offset unrealized losses and may increase your available funds and decrease dynamically as per the profit and loss in the positions, either to strengthen existing positions or initiate new ones. The ZKX platform seamlessly handles these calculations in the background.
Active Trading: Traders engaging in frequently adjusting positions or implementing a variety of strategies on volatile assets can benefit from the flexibility and responsiveness of cross-margin models.
Cross Margining Example:
Charlie chooses cross-margining for his diverse portfolio on ZKX. He has a long position in ETH perpetuals and a short position in SOL perpetuals. The market moves in his favor for ETH, creating unrealized profits, while the SOL position moves against him, accruing unrealized losses.
With cross-margin, the platform automatically leverages the unrealized profits from Charlie's ETH position to support the margin requirements for the SOL position.
The overall portfolio balance reduces the risk of Charlie's SOL position being liquidated and enhances his capital efficiency across the portfolio.
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