Definition ∞ Derivatives Trading Collateral refers to the assets, typically cash or highly liquid securities, that market participants must deposit with a clearinghouse or counterparty to cover potential losses from derivatives contracts. This collateral acts as a performance bond, mitigating credit risk and ensuring the integrity of the derivatives market. In crypto derivatives, this often involves digital assets like stablecoins or the underlying cryptocurrency itself. The amount required is usually determined by margin requirements and market volatility.
Context ∞ The rules and requirements for derivatives trading collateral are a constant focus for regulators and exchanges, particularly in the volatile digital asset space. Discussions often involve appropriate margin levels, accepted collateral types, and cross-margining efficiencies to reduce systemic risk. Observing changes in these requirements or the introduction of new collateral types provides crucial context for understanding risk management practices in crypto derivatives markets.
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