Cross-Margin Mode

By pooling collateral, cross-margin allows traders to open larger positions without posting additional margin for each trade. This increases leverage utilization and frees up capital that would otherwise be locked in isolated positions. For example, a $10,000 account can support multiple positions simultaneously, using the combined equity as a single margin buffer.

The shared collateral pool makes the account more resilient to price volatility in a single market. Losses in one position are offset by the unrealized profits or remaining equity in others, raising the aggregate liquidation price. This is in contrast to isolated margin, where a single position can be liquidated independently, even if the overall account is profitable.

Traders manage one unified margin balance instead of tracking separate requirements for each position. This eliminates the need to manually allocate or rebalance collateral between trades, reducing operational complexity. Margin calls are based on the total account equity, not the performance of individual holdings.

Cross-margin is the preferred mode for strategies involving correlated or offsetting positions, such as delta-neutral trades or futures basis trading. Since profits and losses net against each other within the shared pool, the effective margin requirement for the strategy is lower, allowing for greater scale within the same capital constraints.

A key advantage is the fundamental difference from isolated margin mode. In isolated mode, margin is ring-fenced per position, limiting loss to the allocated collateral but also limiting capital reuse. Cross-margin's holistic approach provides flexibility but introduces the risk of cross-position contagion if risk is not managed at the portfolio level.

In cross-margin, all positions share a single margin pool. A sharp price drop in one asset can deplete the shared collateral, triggering the liquidation of all positions simultaneously, not just the losing one. This creates a systemic risk where unrelated positions are liquidated due to a single market event, potentially causing a cascade across the protocol.

The protocol itself becomes a concentrated counterparty. A smart contract bug, oracle failure, or economic exploit in any supported market can jeopardize the entire cross-margin account. This is a higher-order risk compared to isolated margin, where a failure is typically contained to a single market position.

Traders must monitor the aggregate health ratio of their entire portfolio, not individual positions. Key challenges include:

• Correlation risk: Previously uncorrelated assets can become correlated during market stress.
• Over-leverage: Easy capital reallocation can mask true aggregate leverage.
• Margin calculation opacity: Understanding precise liquidation triggers for a multi-asset portfolio is more complex.

The implementation of cross-margin logic introduces unique attack vectors:

• Donation attacks: Manipulating the share of the collateral pool.
• Liquidation incentive misalignment: Liquidators may be incentivized to trigger unnecessary full-account liquidations.
• Oracle manipulation: A single manipulated price feed can doom the entire account.

Cross-margin blurs traditional financial boundaries, creating regulatory gray areas:

• Rehypothecation: The reuse of collateral across positions may conflict with certain jurisdictional rules.
• Portfolio margining: May not be recognized under all regulatory frameworks for crypto assets.
• Liability structure: Determining liability in a total-loss scenario involving multiple positions is legally complex.

The primary alternative to cross-margin, where margin is allocated and risk is isolated to a single position. A position's maintenance margin and potential liquidation are calculated independently.

• Key Feature: Limits maximum loss to the margin posted for that specific trade.
• Use Case: Preferred for speculative, high-volatility trades where risk must be strictly capped.

The minimum amount of collateral required to keep a leveraged position open. If the account's equity falls below this threshold, it triggers a liquidation.

• In cross-margin, the total account balance is used to meet maintenance requirements across all positions.
• This creates a shared margin pool that dynamically supports all open trades.

The forced closure of a leveraged position by the protocol when its margin ratio falls below the maintenance margin requirement.

• In cross-margin, liquidation risk is aggregate. A loss in one position can deplete the shared margin pool, potentially triggering liquidations across the entire account.
• Contrasts with isolated margin, where liquidation is confined to the under-collateralized position.

A critical risk metric calculated as (Total Equity / Total Maintenance Margin) * 100%. It measures the health of a leveraged account.

• Cross-Margin Calculation: Uses the sum of all positions' maintenance margins and the total account equity.
• A falling ratio indicates increasing risk of liquidation across the portfolio.

A strategy of opening offsetting positions to reduce overall portfolio risk. Cross-margin mode can facilitate complex hedging strategies efficiently.

• Mechanism: Profits from one position can immediately provide margin support to a losing, hedged position within the same account.
• This allows for dynamic risk management without manually transferring funds between isolated positions.

An advanced, cross-margin-like system used in traditional finance (e.g., by brokers like Interactive Brokers) and emerging in DeFi. It uses risk-based models to calculate margin requirements for an entire portfolio.

• Sophistication: Considers correlations and offsets between different asset positions, potentially requiring less total margin than the sum of individual positions.
• Represents an evolution beyond basic cross-margin with more complex netting.