How we strike a balance between users’ interests and market risks

The launch of Perpetual Swap in December 2018 marked a key milestone for our derivatives market, not only because it is a brand new product, but also due to the associated introduction of new market risk management features, the Mark PriceTiered Maintenance Margin Ratio (TMMR) System and Forced Partial Liquidation.

Thanks to the new system, even after several times of extremely volatile market conditions throughout the months, we have recorded ZERO clawbacks in the Perpetual Swap market.

As such, in May, we decided to move the well-tested system to our Futures market.


New Futures Risk Management System —
Upgraded & Tested

Similar to that running in the Perpetual Swap market, the enhanced risk management system for the Futures market comprises two major elements, the Tiered Maintenance Margin Ratio (TMMR) System and Forced Partial Liquidation Mode, along with the Mark Price introduced back in January.

Our philosophy is simple: we strive to strike a better balance between the avoidance of early liquidation (which is caused by high MMR and may hinder users from recovering their losing position) and clawback (which results from low MMR and therefore late liquidation and margin call losses).

Just within a short period of time after its rollout, the new system demonstrated an impressive performance during a recent Bitcoin (BTC) flash crash incident caused by a 5,000 BTC dump at an oddly low price of US$6,200 on BitMEX. The massive sell order caused a BTC market price plunge from US$7,800 to US$6,100 in only 10 minutes and created a short-time arbitrage opportunity.

However, thanks to the diversely-constituted mark price of BTC, which is formed by the market prices from the other five major exchanges, GEMINI, Coinbase, Bitstamp, Kraken, and OKCoin. Therefore, a price crash in one particular exchange will not pose a significant effect on our futures trading price. Here is a price comparison with our peers:

During the incident, our enhanced risk management system demonstrated excellent performance and stabilized the quarterly contract price from a fierce fluctuation at around US$7,000. Impressively, given such a volatile condition, no clawback took place.


New Risk Control Features

The enhanced risk management system consists of the below features to balance users’ interests and market risks:

Maintenance Margin Ratio (MMR)

It is the lowest required margin ratio for a user to maintain an open position. Having learned from our previous lesson, we designed the TMMR system to avoid liquidation of large positions and its after-effect on market liquidity. Basically, the larger the position held, the higher the MMR is required and the lower the leverage level is available.

The MMR varies by position size and asset type. For detailed TMMR schedule for different assets, please visit here:bitcoin futures,btc futures,OKEX futures | OKEX.com – The Leading Global Bitcoin/Ethereum/Litecoin…
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It is also important to be aware of the following formulas before trading futures:

  • In fixed-margin mode, the number of contracts, tier, and the MMR are calculated based on a specific position.
  • In cross-margin mode, the number of contracts, tier, and the MMR are calculated based on all positions in an account.
  • Fixed-margin mode: Margin Ratio = (Fixed Margin + UPL) / Position Value
  • Cross-margin mode: Margin Ratio = (Balance + RPL + UPL) / Position Value
  • Position Value = Face Value x Number of Contracts / Latest Mark Price

Partial Liquidation

It is designed to avoid a large number of liquidation orders resulting from forced full liquidation impacting the market. For a position at Tier 3 or above, forced partial liquidation occurs when the margin ratio is lower than the MMR. If the margin ratio of the remaining position does not reach the MMR, then the unfilled liquidation orders will be canceled. The liquidation procedure will start over again. This process will be repeated until the latest margin ratio meets the MMR requirement.

  • In fixed-margin mode, the position will be taken over during liquidation;
  • In cross-margin mode, the futures account will be taken over during liquidation.

Smarter reselling strategy

An alternative to the bankruptcy price, an entrusted price adopted for reselling liquidated positions. Instead of putting them on the market at the current market price, the entrusted price is calculated based on current market depth, basis, bankruptcy price and index price, which aims to increase transaction efficiency and return to cover the loss, and hence, prevent margin call loss and clawback.


We have spent enormous efforts on preventing clawback from happening since last year. Instead of growing our insurance fund rapidly by liquidating losing positions earlier, we decided to focus on improving and optimizing our liquidation engine to offer a better trading experience to our users while, at the same time, to minimize market risks.

As always, we welcome your suggestions for improving your trading experience at all times. If you have any ideas to make our futures market greater, please feel free to email us at futures@okex.com.


Risk Warning: Trading digital assets involves significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.


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