Does the Clearing House Adjust Margin Requirements in Real-Time or Only at the End of the Day?
Most traditional clearing houses adjust initial and maintenance margin requirements only at the end of the trading day or on an intraday basis following significant market events. However, many cryptocurrency futures exchanges operate 24/7 and use real-time risk engines that continuously calculate and adjust margin requirements based on the latest market prices and volatility, leading to continuous liquidation risk.
Glossar
Trading Day
Session ⎊ The cryptocurrency, options, and derivatives trading day is fundamentally defined by the operational hours of the relevant exchange or trading platform.
Real-Time Margin Calculation
Marking ⎊ The process necessitates continuous revaluation of open derivative positions against the most current spot price data, often at sub-minute intervals.
Clearing House
Settlement ⎊ A clearing house, within cryptocurrency and derivatives markets, functions as an intermediary between buyers and sellers, mitigating counterparty risk through a process of novation ⎊ replacing original trade agreements with new ones directly with the clearing house.
Real-Time Risk Engines
Calibration ⎊ Real-Time Risk Engines, within cryptocurrency, options, and derivatives, function as dynamic systems continuously adjusting to incoming market data, employing quantitative models to assess portfolio exposure.
Margin Requirements
Definition ⎊ Margin requirements refer to the minimum amount of capital an investor must deposit and maintain with a broker or exchange to open and sustain a leveraged position in derivatives trading.
Cryptocurrency Futures Exchanges
Mechanism ⎊ Cryptocurrency futures exchanges represent centralized or decentralized platforms facilitating the trading of forward contracts obligating parties to buy or sell an underlying cryptocurrency asset at a predetermined price on a future date.