In a digital asset derivatives market, users can join contract trading by using a certain percentage of assets based on the contract price as the financial guarantee for the performance of the contract. Such assets are the margin required for contract trading. After a position is opened, the margin required for holding the position will change with the latest price.

Isolated margin mode：

The account equity for each swaps is calculated separately, and the occupied margin, PnL and margin ratio of each swaps will not affect each other.

For example, user A has BTC and ETH positions in USDT-settled perpetual contract under isolated mode; If user A's BTC position margin ratio is less than or equal to 0 which triggers liquidation, then the user's BTC/USDT USDT perpetual contract account has no remaining assets and his ETH/USDT perpetual contract account shall not be affected.

Cross margin mode:

All swaps under the cross margin mode share the USDT in the cross margin account as the margin, which indicates that all positions under the cross margin mode share the same account equity, and their PnL, occupied margin and margin ratio are calculated jointly.

For example, user B has BTC and ETH positions in USDT-settled perpetual contract under cross-margin mode, then the margin is shared by all assets in the cross-margin account, and the margin rate of the position is calculated jointly. When the margin ratio of the USDT perpetual contract under cross-margin mode is less than or equal to 0, the liquidation to user's BTC and ETH positions may be both triggered.

In USDT-margined swaps trading, users can trade a swaps by using cross and isolated margin modes at the same time with the margin in each account calculated separately. Users could switch for cross or isolated mode without current positions being affected. For example, users could hold BTC/USDT (cross) and BTC/USDT (isolated) at the same time.

**Margin Calculation**

Position margin = Face value * Position Quantity * Latest price / Leverage

Example 1: A user buys 100 conts BTC/USDT swaps to open a long position, the face value of each contract is 0.001 BTC, the latest price is 5000 USDT, and the leverage is 10x, therefore according to the formula, the position margin=0.001 * 100 * 5000 / 10 = 50 USDT

Example 2: A user buys 100 conts ETH/USDT swaps to open a long position, the face value of each contract is 0.01 ETH, the latest price is 500 USDT, and the leverage is 10x, therefore according to the formula, the position margin= 0.01 * 100 * 500 / 10 = 50 USDT

**Tired Margin Rules**

In order to maintain the stability of the contract market and reduce the risk of large positions,BHEX Futures uses a differential margin system. When the user chooses 20x or more than 20x leverage, and the user's account equity exceeds a certain range, the available margin will change. Choosing 10x and lower leverage will not be influenced by differential margin system. Cross margin mode account and isolated margin mode account have the same available margin range. Details are showed as follow:

**Unit: USDT**

Here is the margin range of the BTC/USDT-settled perpetual contract:

Note: For maximum scale of Differentiate Margin System, Available coefficient = 1 / Corresponding leverage

Example:

Assume the account equity of User A’s BTC/USDT swaps is 5,000 USDT, then the higher the leverage the user selects, the smaller the available margin:

When 1x- 50x leverage is selected, the available margin will not change

When 75x leverage is selected, the account equity 5,000 USDT belongs to the available coefficient range of the second tier. The first 3,000 USDT belongs to the first tier, therefore will not be affected; For the part that exceeding 3,000 but lower than 23,000, its available margin equals to “the amount of that part * available coefficient”, therefore User A’s tiered available margin under the 75x leverage = 3000+(5000-3000) *50%=4000 USDT;

When 100x leverage is selected, the account equity 5000 USDT belongs to the available coefficient range of the third tier. The first 2500 belongs to the first tier, therefore will not be affected; For the second part that exceeding 2500 but lower than 4000, it belongs to the second tier whose available coefficient is 50%; hence the corresponding available margin is 2500+(4000-2500)*50%=3250 USDT. For the third part that exceeding 4000 but lower than 40,000, it belongs to the third tier whose available coefficient is 20%; hence the corresponding available margin equals to “the amount of that part * available coefficient”. Then, User A’s tiered available margin under the 100x leverage = 3250+(5000-4000)*20%=3450 USDT;

Example 2:

Assume User A transfers 100 million USDT to his cross margin account and uses 20x leverage for cross-margined BTC/USDT swaps trading. Now his position margin is 350,000 USDT. If User A still wants to open a position of cross-margined ETH/USDT swaps under the 20x leverage, how much available margin he has?

First, the 350,000 USDT position margin of BTC/USDT swaps under the 20x leverage has entered the available coefficient range of 2nd tier, therefore, we need to reversely derive the position margin actually occupied by this position: 250,000+(350,000-250,000)/33.33%=550,000 USDT；

Due to the fact that BTC/USDT has occupied 550,000 USDT, there are 1,000,000 – 550,000 = 450,000 USDT can be used for other positions, and it will also be affected by tiered available margin;

If User A still wants to open a position of cross-margined ETH/USDT swaps under the 20x leverage, based on the tiered available margin range of ETH/USDT, for the part that exceeding 300,000 but lower than 600,000, the corresponding available margin equals to “the amount of that part * available coefficient”. Then, Tom’s tiered available margin = 120,000+ [(450,000-300,000) *20%] =150,000 USDT.

**Locked Margin Optimization Scheme for USDT-Settled Swaps**

To improve asset utilization and to reduce position margin for users, BHEX USDT-Settled Swaps implements locked margin optimization scheme when users have swaps with both long and short positions for the same coin. When users have swaps contracts with both long and short positions for the same coin, locked margin optimization scheme could reduce part of users’ position margin. The formula is as below:

**New position margin = Long position margin+ Short position margin – Locked margin * Optimization ratio of the locked margin**

**Position margin = Contract face value * Position quantity * Latest transaction price / Leverage****Locked margin = min (Long position margin, Short position margin)****Optimization ratio of the locked margin is 100%.**

Note: New position margin (account) under the cross margin mode = Σ New position margin of all swaps under the cross margin account.

Example:

User B holds a long position of 1000 conts BTC/USDT swaps and a short position of 800 conts of BTC/USDT swaps both in 20x leverage. The face value of each contract is 0.001 BTC. Assume the latest price of BTC/USDT swaps is 8000, the new position margin of Tom is calculated as following:

- Calculate User B’s long and short position margin. According to the formula, Position margin = Face value * Position quantity * Latest price / leverage, then the Long position margin is 0.001 * 1000 * 8000 / 20 = 400 USDT, and the short position margin is 0.001 * 800 * 8000 / 20 = 320 USDT.
- Calculate User’s locked margin. According to the formula, Locked margin = min (Long position margin, Short position margin), then the locked margin is min (400, 320) = 320 USDT.
- Calculate User’s new position margin. According to the formula, New position margin = Long position margin+ Short position margin – locked margin * optimization ratio of locked margin=400 + 320－320 * 100% = 400 USDT.

- From above calculation we can get that in this optimization mechanism, the new position margin of User B is 400 USDT, which is much lower than its original 400 +320 = 720 USDT.

**Calculation for Available Asset for Transfer**

**Available Asset for Transfer = max {0, Current-period initial equity + Current-period transfer_in quantity - Current-period transfer_out quantity + min (Realized PnL, 0) + min (Unrealized PnL, 0) - max [ 0, f(Occupied) - max (0, Realized PnL)]} + max {0, [Realized PnL - f (Occupied)]} * Available coefficient of realized PnL.**

Note: The available coefficient of assets settled periodically is 0, and the available coefficient of assets settled in real-time is 1.

Example 1: Assume User B’s initial equity in BTC/USDT swaps account was 500USDT, and bought 100 conts swaps of a long position with leverage 5X and open price of 10,000USDT. When the latest price rises to 12,000USD, the available asset for transfer are calculated as below (transaction fees will be negligible):

Unrealized PnL = (12,000 – 10,000) * 0.001 * 100 = 200 USDT;

f(Occupied) =Occupied margin= 100 * 0.001 * 12,000 / 5 = 240 USDT;

Available asset for transfer = max [0, 500+0-0+0+0-240] + 0 = 260 USDT.

Example 2: Assume User B’s initial equity in BTC/USDT swaps account was 50,000USDT, and bought 100,000 conts swaps of a long position with leverage 100X and open price of 10,000USD. When the latest price reached 12,000USD, he closed 50,000 conts. Then the price declines to 9,000USD, at this time, the available asset for transfer are calculated as below (transaction fees will be negligible):

Unrealized PnL = (9,000 – 10,000) * 0.001 * 50,000 = -50,000 USDT;

Realized PnL = (12,000 – 10,000) * 0.001 * 50,000 = 100,000 USDT;

Occupied margin = 50,000 * 0.001 * 9,000 / 100 = 4,500 USDT;

However, when using the leverage 100X, the available margin is limited by the tiered margin and the corresponding available coefficient turns to be 20.00%, then the actual f(Occupied) needs to be calculated as below:

f(Occupied) = 4,000 + ( 4,500 – 3,250 ) / 20.00% = 10,250 USDT;

Available asset for transfer = max [0, 50,000+0-0+0-50,000] + [ 100,000 – 10,250] = 89,750 USDT.

Therefore, when the account equity exceeded a certain range and used larger leverage, the available margin will be restricted by the tiered margin. Then the occupied margin actually required becomes more, and the remaining available asset for transfer becomes relatively less.