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Isolated Margin Trading Rules

Binance
2020-05-21 05:17

1. General Rules

1.1 In order to standardize the leveraged trades and leveraged loans of cryptocurrency assets, maintain market order, and protect the legitimate rights and interests of investors, these rules were formulated in accordance with the principles of fairness, openness, and impartiality.
1.2 These rules are the benchmark for Binance's leveraged trading business, including statements of investors’ borrowing, trading, and other operations in the leverage market.
1.3 These rules apply to isolated margin borrowing and trading in Binance. If there are no provisions in these rules, the Binance Terms of Use and other relevant regulations of Binance shall apply.

2. Collateral

2.1 In isolated leverage mode, each trading pair has a specific isolated margin account. The net asset in each isolated margin account can only be used as a margin for the specific trading pair.
2.2 Each isolated margin account can only accept the underlying currency and the denominated currency in its specific trading pair as margin.

3. Assets Borrowing

3.1 In isolated leverage mode, users can only borrow two specific currencies under the current trading pair as loan assets. For more details, it can be referred to https://www.binance.com/en/margin-fee.
3.2 To ensure the safety of the assets, Binance has the right to adjust the upper limit of assets borrowing and trade permission of the borrowed assets in each isolated margin account.

4. Borrowing Rules

4.1 The maximum borrowable limit in an isolated margin account refers to the largest borrowable amount in the specific isolated margin account. The system will calculate the user's maximum amount allowed to borrow based on restrictions, including the amount in isolated leverage, amount allowed to borrow, risk control rules of the platform, and others.
In this rule, the maximum amount a user can borrow = min (net assets in each isolated margin account * (maximum leverage in the corresponding isolated margin account -1) - assets to be refunded , the maximum amount Binance platform can loan)
4.2 The loan digital assets will be transferred to the user's corresponding isolated leveraged account instantly once the user has borrowed successfully, and the system will start to calculate interest forthwith. Users can use the borrowed digital assets to conduct leveraged trades in the corresponding isolated leveraged trading pairs.
4.3 The rules for borrowing on Tiered leverage: the system adjusts the effective margin level based on the amount of the funds borrowed by a user. Thus, the corresponding initial risk ratio and liquidation risk ratio will vary. Herein, there are 10 tiers for 10x margin and 5 tiers for 5x margin. For more information, please refer to the Tiered Leverage Function article.

5. Borrowing Rate Calculation Rules

5.1 Interest calculation rules: interest is calculated on an hourly basis. If funds are borrowed for less than 1 hour, the interest rate will still be calculated as for assets borrowed for 1 hour. Interest calculation starts from actual borrowing time, which means borrowing time will be counted as 1 hour after assets borrowed successfully, and will be counted as 2 hours until the next hour.
The calculation formula: I (interest) = P (borrowed money/principal) * R (daily interest/24) * T (in hours)
5.2 User can repay the loan in advance, and pay interest according to the actual borrowed hour, if less than 1 hour, the interest is calculated for 1 hour. When repaying the loan, the user pays the interest rate value first, then principal.
5.3 The unrepaid interest is included in the margin level calculation. If the interest is not repaid for a long time, it may cause the margin level of the user's current isolated leveraged account to drop below the liquidation line, resulting in the position being forced to liquidate. Users may choose to pay off the interest periodically or leave enough available balance in the current isolated leveraged account.
5.4 Margin account interest rates may adjust from time to time. The latest interest rate can be found on https://www.binance.com/en/margin-fee.
5.5 Automatic borrowing rule: users can use the automatic borrowing function on the isolated leveraged trading page.

6. Use BNB to Get Discount on Isolated Margin Fees

6.1 Binance Isolated Margin users will have the opportunity to enjoy a 25% discount on standard trading fees every time they choose to pay with BNB. Check the Fee Structure page for more details.
Users can enable this discount by navigating to their User Center > Dashboard > Your Trading Fee Level. No other operation is needed if “Use BNB” for paying fees (25% discount) is already enabled.
6.2 You need to have enough BNB in your spot wallet balance to pay for Isolated Margin trading fees. Otherwise, you won’t receive your 25% discount.
6.3 Users need to pay for trading fees by the standard rate first on Isolated Margin trading page. Afterwards, the discounted trading fees for using BNB are charged in the Spot Wallet hourly, and the paid trading fees will be refunded to users’ Isolated Margin account.

7. Repay Rules

7.1 Users can manually select to repay the loan assets partially or entirely. Interest will be repaid firstly, then the principal. The system will calculate interest based on the latest borrowed quantity in the next hour.
7.2 Debt repaying: when repaying the debt, users need to use the same currency as they borrowed, repaying in other currencies is not allowed. Therefore, users need to ensure that there is enough balance of the borrowed asset in their Isolated Leveraged account before repaying.
7.3 Automatic repayment rules: users can use the automatic repayment function on the leverage trading page. When users choose this function and place orders, the system will automatically use the obtained funds once the orders are filled completely to repay debt. Automatic repayment will only be executed after the order is fully filled. If the funds gained via a fully filled order is insufficient to repay the debt, the system will select to repay 90% of the debt automatically, leaving the rest to be repaid by the user manually.

8. Risk control

8.1 The net assets in the user‘s isolate margin account can only be used as collateral in the corresponding account, and the assets in the user's other accounts (Cross Margin account or other Isolated accounts) couldn't be calculated as collateral.
8.2 Binance has the right to monitor the margin level (hereinafter referred to as ML) of the user's Isolated Margin account in real-time and take corresponding measures according to the change of margin level.
In this rule, the margin level of the Isolated account = the total value of assets under the Isolated account / (total value of liabilities + unpaid interest)
Among them, the total value of assets = the total value of the underlying assets + nominal assets in the current isolated account
Total liabilities = The total value of the assets that have been borrowed but not returned in the current isolated account
Unrepaid interest = (the amount of each loaned asset * the time length of the loan * hourly interest rate) - repaid interest
8.3 Margin level and Operations
When the Margin Level (hereinafter referred to as ML) > 2, users can trade, borrow, and the excess assets in the account can also be transferred to other trading accounts. But the ML still needs to equal or greater than 2 after transferring out to ensure normal asset transferring out functions.
  • Initial Ratio (IR)
IR is the initial risk rate after the user borrows, and there are different IRs according to different leverage. For example, the IR will be 1.5 under the 3x leverage with full borrowing, the IR will be 1.25 under 5x leverage with full borrowing and the IR will be 1.11 under 10X leverage with full borrowing.
  • Margin Call Ratio (MCR)
When MCR < ML ≤ 2, users can trade and borrow, but cannot transfer assets out
The MCR will be different according to different leverage. For example, the MCR for a 3x leverage is 1.35, for 5x leverage, it will be 1.18 and for 10x, it will be 1.09.
  • Liquidation Ratio (LR )
When LR < ML ≤ MCR, a margin call will be triggered. The system will notify user via email, SMS, and website reminder to supply additional margin (that is, transfer more collateral funds to the Margin Account) to avoid the risk of liquidation. After the first notice, notifications will be sent every 24 hours until ML ≥ MCR.
When ML ≤ LR, the system will execute the liquidation process. The assets held in the account will be forced to sell to repay the loan. At the same time, users will be notified via email, SMS, and website reminder.
LR will vary according to different leverages. For example, the LR for 3x leverage is 1.18, for 5x leverage, it is1.15 while for 10x leverage, it is 1.05.
8.4 Users should pay attention to the risk of Margin trading and adjust the position in time to avoid risk. All losses caused by the triggering of liquidation in the Margin Account are borne by the users themselves, including but not limited to: due to extreme price fluctuation, the ML of the Isolated Account has reached the MCR line and the LR line within a short time and the user fails to take corresponding measures in time after receiving the prompt messages sent by the system.
8.5 Binance will carry out intelligent risk management on leveraged trades and risks. When leveraged trades or loans on the platform enter the scope of intelligent risk warning, the platform will take measures to prevent greater risks, including but not limited to: prohibition on transfer, on long, on short, on leverage trades and liquidation.
8.6 Binance will adjust the personal maximum leveraged loan amount and total platform loan amount according to the risk and the actual market operation.
8.7 Binance has established an official Margin Risk Fund that will be used to pay for the outstanding loans of liquidated margin accounts. Since April 27, 2020, 15% of all interest fees collected from margin borrowing will be allocated to the Fund.
8.8 Tiered liquidation is subjected to tiered leverage in Isolated Margin.Users’ positions will be liquidated partially to match next tiered leverage if it was under liquidation risk.For more information, please refer to the Tiered Leverage Function article.

9. Sub-account Rules

9.1 Sub-accounts can only be enabled for Isolated Margin Account after opening Cross Margin Account;
9.2 The maximum borrowable amount of the sub-account is 1/10 of the borrowable amount of the master account;

10. Calculation Rules of Margin Account Balance and Trading Volume

10.1 The daily average BNB balance of Isolated Margin Account (including Isolated Margin Accounts under sub-accounts) will be calculated in the total daily average BNB balance. The calculation formula is as follows:
Daily average BNB balance of Isolated Margin Account (including Isolated Margin accounts under sub-accounts) = The sum of the hourly snapshots of the Net BNB balance(Net BNB Balance = BNB Total Balance - Borrowed BNB - Interest Payable in BNB) divided by 24 (hours).
  • Snapshots are taken at random times every hour
  • Pending orders are included in position statistics
10.2 The trading volume of the Isolated Margin account (including the margin trading volume of the sub-accounts) will be calculated in the user's total daily trading volume;

11. Supplementary Provisions

11.1 Binance provides information release, supervision, and risk control services for Isolated Margin trading and lending, and does not provide any income guarantee and capital guarantee for users' margin trading on Binance. Investors should fully realize that there are relatively large risks, and self-assess the possible losses, and then voluntarily participate on the basis of confirming that the risk is controllable and affordable.
11.2 The terms "exceed" and "below" in this provision do not include equals sign, "not exceed", "not less than", "above" and "reach" contain equals sign.
11.3 These rules are formulated by the Binance platform and are effective after the announcement to all platform investors, the same applies to modifications.
11.4 The Binance platform has the sole discretion of interpreting these rules.
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