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How Does Auto-Exchange Work in Multi-Assets Mode

2022-07-06 06:56

What is Auto-Exchange?

Auto-Exchange is a mechanism to ensure that the USDT or BUSD balances in the USDⓈ-M Futures Wallet do not fall below a certain threshold.
When Auto-Exchange is triggered, all positive balance assets under the USDⓈ-Margined Futures Wallet are automatically converted at market price by the Auto-Exchange service engine to cover the corresponding BUSD or USDT deficit.

When will Auto-Exchange be triggered in the Multi-Assets Mode?

Under the Multi-Assets Mode, Auto-Exchange will happen under three circumstances:
1. When either the USDT or BUSD wallet balance is lower than the autoExchangeThreshold (-10,000 USD), the Auto-Exchange service engine will proportionally convert other assets in the USDⓈ-Margined Futures Wallet to USDT or BUSD to cover the deficit.
2. In case of liquidation, Auto-Exchange will be immediately triggered if the BUSD or USDT balance in the USDⓈ-M Futures Wallet is insufficient to cover the deficit.
3. When you have a negative balance in your USDⓈ-M Futures Wallet with no existing positions or open orders, the system will continuously calculate the LTV (Loan-To-Value) ratio and trigger Auto-Exchange when LTV ≥ 1.
Note: LTV = abs(∑negative asset WalletBalance in USD value*(1 + Auto-Exchange Haircut)) / ∑positive asset WalletBalance in USD value*(1 - Auto-Exchange Haircut)

When your BUSD or USDT balance in the USDⓈ-M Futures Wallet is not negative, and the USDⓈ-Margined Future Wallet balance is over -10,000 USD, the auto-conversion will not happen.
Suppose either the BUSD or USDT Wallet balance is below -10,000 USD. In that case, other assets in the USDⓈ-Margined Futures Wallet will be converted to BUSD or USDT to cover the deficit, deducting the corresponding margin assets amount.
Auto-Exchange can help you balance your account and increase the utilization rate of funds in case of losses.

What are the Auto-Exchange haircut rates?

While there are no fees for Auto-Exchange, the following haircut rates (also referred to as the collateral rate) apply to the Auto-Exchanged assets to mitigate the liquidity risks:
Assets
Auto-Exchange Haircut
BTC
2.5%
ETH
2.5%
BNB
5%
ADA
5%
XRP
5%
DOT
5%
SOL
5%
BUSD
No haircut

Examples of Auto-Exchange

Example 1:
You have a positive BTC balance and a negative BUSD balance in your USDⓈ-Margined Futures Wallet while trading in the Multi-Assets Mode.
Let’s assume your BUSD balance falls to -20,000 BUSD, which triggers the Auto-Exchange (below the -10,000 USD threshold), taking into account the 2.5% haircut rate in the process.
Subsequently, 20,000 BUSD / 97.5% = 20,513 BUSD of your BTC balance will be converted to BUSD to cover the negative BUSD balance in the USDⓈ-M Futures Wallet.

Example 2:
Under the Multi-Asset Mode, if you do not have any existing position or open order, the USDⓈ-M Futures Wallet balance is 1 BNB + (-600) BUSD
  • Suppose BNB/BUSD = $700
Your LTV = abs(-600)/(700*(1-5%)) = 0.90 < 1, Auto-Exchange will not be triggered;
  • Suppose BNB/BUSD = $600
Your LTV = abs(-600)/(600*(1-5%)) = 1.05 ≥ 1, Auto-Exchange will be triggered. Your BNB will be converted to BUSD to clear the negative BUSD balance.
To avoid triggering Auto-Exchange, you can convert or transfer margin assets to the USDⓈ-M Futures Wallet to maintain the negative balance below the -$10,000 threshold. If you do not have any existing positions or open orders and there is a deficit in your USDⓈ-M Futures Wallet, you are advised to convert or transfer sufficient margin assets to the USDⓈ-M Futures Wallet in a timely manner to prevent the account LTV from going above 1, which would trigger Auto-Exchange.
To reduce risks, Binance may temporarily adjust the Auto-Exchange threshold and execute the conversion automatically. You may notice that the balance of a certain asset in your USDⓈ-M Futures Wallet is negative. However, this does not necessarily mean the balance of your USDⓈ-M Futures Wallet is at a loss.