How Is the Maximum Leverage Determined by an Exchange?
The maximum leverage offered is determined by the exchange's risk management policy and regulatory requirements. It is often inversely proportional to the contract's notional value and the asset's volatility.
Higher leverage is offered for smaller positions and less volatile assets. Exchanges set limits to protect their own clearing funds and to manage the systemic risk of mass liquidations.
Glossar
Maximum Leverage
Amplification ⎊ Maximum leverage, within cryptocurrency and derivatives markets, represents the utilization of borrowed capital to increase the potential return of an investment, fundamentally altering risk-exposure profiles.
Maximum Leverage Offered
Limit ⎊ The maximum leverage offered represents the upper limit set by a derivatives exchange on the multiplier a trader can apply to their position size.