Why Is a High Maintenance Margin Beneficial for Exchange Stability?
A high maintenance margin requirement acts as a larger buffer against sudden, large price movements. It ensures that when a trader's position is liquidated, the exchange or its insurance fund is more likely to cover the losses, preventing a cascade of defaults.
This contributes to the overall financial stability and integrity of the exchange's trading environment.
Glossar
High Maintenance Margin
Requirement ⎊ A High Maintenance Margin refers to a proportionally large minimum collateral level that a trader must maintain in their account to keep a leveraged position open, relative to the position's total value.
Stability
Resilience ⎊ Financial stability within cryptocurrency contexts centers on the capacity of a system, or specific asset, to absorb shocks and maintain core functionality.
Maintenance Margin
Collateral ⎊ Within cryptocurrency derivatives and options trading, the maintenance margin represents the minimum equity a trader must maintain in their account to cover potential losses.