We are keen to announce the launch of various changes to our portfolio margin model.
Going forwards we will have two versions available and clients can choose the preferred setup:
1. Segregated Portfolio Margin (guide)
2. Cross Collateral (Portfolio Margin) – coming in April ‘24
Tomorrow we will launch Segregated Portfolio Margin (Segregated PM), marking the first of multiple significant new risk enhancements to our trading platform.
The main difference between Segregated PM and multi currency Cross Collateral, is the treatment of currencies on a segregated basis or in aggregate. All other features mentioned below will apply to both Segregated PM and Cross Collateral.
Key Changes to the New Portfolio Margin Model
Balance reflective: Our new model recognizes the unique risks of unbalanced positions (for example portfolios skewed towards price increase or decline, position size, basis etc) by margining these higher, while offering reduced margin requirements for well-balanced positions.
Improved IM accuracy: The new model calculates initial margins more precisely (instead of 1.2*MM) ensuring long options are not over-collateralized. This means traders can utilize their capital more effectively, without the burden of excessive collateral.
Comprehensive Market Move Analysis: The new model adopts a broader view of potential market movements, assessing fractions of much larger price moves. Margin requirements are adjusted only when the projected loss is substantial, which aligns margin requirements more closely with actual risk.
Removal Short Vega Limit Cap: Reflecting our improved approach to market move analysis, New PM accounts will not have a short vega limit cap imposed. The hard cap is no longer needed as the new model takes moves of -66% to +500% into account (in addition to -16% to +16% for BTC and ETH subject to change) and automatically charges additional margin accordingly.
Removal of Option Contingency: New PM accounts will not have an additional option contingency because of the enlarged scenario range in the extended risk matrix.
Removal of Futures Contingency: By replacing future contingency with a delta and roll shock-based method, our model adopts a more nuanced, risk-sensitive approach to futures margining, whilst including the options delta here.
Upcoming Enhancements
Looking forward, we are excited to share that our short-term roadmap includes the introduction of collateral offset for USDC-settled altcoin options when holding the underlying coin (date to be confirmed), and the launch of full multi currency cross-collateral capabilities in April.
These enhancements are part of our ongoing commitment to providing our clients with the most advanced, flexible, and efficient trading suite in the market.
We believe these changes will significantly benefit our users by providing more accurate, risk-aligned margin requirements, enabling greater trading flexibility and efficiency. Stay tuned for further updates as we continue to enhance our platform to meet and exceed the needs of our trading community.
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