Can MTM Trigger a Margin Call?
Yes, marking-to-market (MTM) is the direct mechanism that can trigger a margin call. When a futures position incurs losses due to adverse price movement, the MTM process debits those losses from the trader's margin account.
If this debit causes the account balance (equity) to drop below the required maintenance margin, the clearinghouse will issue a margin call, demanding the trader deposit additional funds to restore the margin level.
Glossar
MTM
Valuation ⎊ Market-to-Market, or MTM, within cryptocurrency derivatives represents the continuous recalculation of the profit or loss on open positions based on real-time market prices, a practice critical for risk management and collateralization.
MTM Process
Calculation ⎊ This systematic procedure involves valuing all open derivative positions using the latest available market data, including spot prices and the prevailing implied volatility surface.