Cross-margin trading uses the entire balance of a trading account as collateral for all open positions. Unlike isolated margin, where collateral is allocated per position, cross-margin allows any available funds in the margin account to be used to prevent liquidation of any open trade. This approach offers greater flexibility and potentially lower liquidation risk for individual positions, as a winning trade can offset losses in another. However, it also means that a significant market downturn could jeopardize the entire account balance.
Context
Cross-margin trading is a common feature on many cryptocurrency derivatives exchanges, attracting traders who manage multiple positions and seek capital efficiency. News articles often cover instances of market volatility leading to widespread liquidations in cross-margin accounts, highlighting the amplified risks involved. Regulatory bodies are increasingly scrutinizing the leverage offered by exchanges and the mechanisms of margin trading due to concerns about systemic risk in the digital asset market.
The new isolated risk engine on Vertex enables LPs to permissionlessly list any asset for trading, fundamentally shifting derivatives liquidity provisioning.
The unified margin primitive aggregates collateral across multiple DeFi venues, fundamentally solving capital fragmentation for advanced on-chain trading.
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