What is Cross Collateral?

Cross Collateral means you can use multiple assets (coins) as margin.

Without Cross Collateral, EQONEX users can only use USD or USDC as collateral assets to fund their Total Account Margin. When you enable Cross Collateral, you can also use other digital assets, such as BTC, to fund your Total Account Margin. Therefore, you don’t need to have any USD or USDC in your account to open a perpetual position.

Your Total Account Margin remains a USDC value. The USDC contribution to your Total Account Margin from each coin is determined by the Mark Price for the coin and amended by its haircut.

You can turn on/off Cross Collateral at the main account and the sub-account level.

What coins are eligible for Collateral?

Currently, only USDC and BTC are eligible for collateral. The following haircuts apply:

Asset

Haircut

USDC

0%

BTC

20%

How can you benefit from using Cross Collateral?

If you turn on Cross Collateral, you do not necessarily need to hold any USD or USDC in your account to open a margined (derivatives) position. Therefore the primary benefit for EQONEX users is increased capital efficiency and flexibility, as there is no need to first convert your BTC into USDC before opening a margined position. Similarly, for users that already have both USDC and BTC balances, enabling Cross Collateral provides the option to trade a larger notional amount compared to the notional amount that could be traded when only using USDC as collateral asset.

However, the opportunity to trade a larger notional amount means there is a chance that some or all of your collateral assets, not just USDC, may be liquidated. Please refer to Cross Collateral Liquidation for more information.

How does Cross Collateral work?

On EQONEX, Cross Collateral is turned off by default. You can enable Cross Collateral separately for your Main and each of your Sub Accounts. For example, you can choose to turn on Cross Collateral on one of your Sub Accounts but have it turned off on all your other accounts. Similarly, you can choose whether to enable Cross Collateral on your Main Account.

Total Account Margin under Cross Collateral

Your Total Account Margin remains a value expressed in USDC. The USDC value of any assets used for Cross Collateral is determined by the Mark Price of the coin and adjusted by the haircut. This value is then added to your Total Account Margin and is marked to market in real-time. That means that if the price of the asset used for collateral (e.g., BTC) changes, the value that contributes to your Total Account Margin also changes.

The definitions below show how the calculation of Total Account Margin differs when Cross Collateral is disabled versus enabled:

  • Total Account Margin (Cross Collateral disabled)
    Total notional of USDC available for margin, including any unrealized P&L, less any capital required for open non-margin (spot) orders.

  • Total Account Margin (Cross Collateral enabled)
    Total USDC equivalent notional of all assets available for margin adjusted for haircuts, including any unrealized P&L, less any capital required for open non-margin (spot) orders.

Example 1

Alice has the Cross Collateral disabled. She has the following balances, open orders, and open positions:

Balances

Asset

Qty

Mark Price (in USDC)

USDC

50,000

-

BTC

2

40,000

ETH

1

2,000

Open Spot Orders

Asset

Order

Limit Price (in USDC)

BTC/USDC

Buy 0.5

35,000

Open Margined Positions

Asset

Position

Unrealized P&L (in USDC)

BTC/USDC Perpetual

-1

-1,000

Because Alice has Cross Collateral disabled, only her USDC can be used as margin. The Total Account Margin for Alice is as follow:

Total Account Margin = Total notional of USDC available for margin adjusted with

haircut + Unrealized P&L – Capital required for open spot order = 50,000*(1-0%) +

(-1,000) – (0.5*35,000) = 31,500

Example 2

Alice decides to enable Cross Collateral. The Total Account Margin for Alice now factors in both the USDC and BTC balances. The ETH balance still does not contribute to her Total Account Margin as it is not currently eligible to be used for Cross Collateral. For BTC, the USDC equivalent notional is determined by the BTC Mark Price and is adjusted by its 20% haircut.

Balances

Asset

Qty

Mark Price (in USDC)

USDC

50,000

-

BTC

2

40,000

ETH

1

2,000

Open Spot Orders

Asset

Order

Limit Price (in USDC)

BTC/USDC

Buy 0.5

35,000

Open Positions

Asset

Order

Unrealized P&L (in USDC)

BTC/USDC Perpetual

Short 1

-1,000

Total Account Margin = Total USDC equivalent notional of all assets available for

margin adjusted for haircuts + Unrealized P&L for futures position – Capital

required for open spot order = 50,000 * (1-0%) + 40,000 * 2 * (1-20%) + (-1,000) –

(0.5*35,000) = 95,500

Please refer to the Maximum Leverage and Margin for more information on Total Account Margin.

Related articles:

Cross Collateral Settings

You can turn on/off Cross Collateral from the account management pages, which can be found from the menu bar by selecting your account name and then “Manage” under the dropdown list.

The Negative Balance Feature can only be switched on with Cross Collateral enabled.

For a more detailed description on turning Cross Collateral on and off, please see How to enable Cross Collateral and Negative Balance.

For further assistance or more information, please contact our Customer Support team via help@eqonex.com or click on the chat widget at the bottom right-hand side of the EQONEX page.

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