Understanding Ultimate Beneficial Owner (UBO) Risk Controls
To ensure a fair, stable, and sound trading environment for all users, our exchange manages risk at the Ultimate Beneficial Owner (UBO) level. The UBO is the legal entity that has signed the trading agreement. While a UBO can create multiple "sub-portfolios" to manage different trading strategies, our most important risk and margin calculations are applied holistically across your entire UBO account.This UBO-level management includes three key concepts: (1) margin & excess, (2) position limit, and (3) auto sweep if a sub-portfolio is in danger.
1. UBO-Level Margin Requirement
Our margin requirements are tiered based on your total notional position. We aggregate positions across all your sub-portfolios to apply the correct margin tier. This prevents "gaming" the system by splitting large positions to get lower margin rates.Here’s an illustrative calculation showing how your available excess margin ("UBO excess") is determined.
Margin Requirements
BTC (Up to $600k): 10% Initial Margin (IM)
BTC (Over $600k): 15% Initial Margin (IM)
UBO Account Setup
Total Equity (Current Margin): $1,000,000
Sub-Portfolio A: Long $500,000 BTC-PERP
Sub-Portfolio B: Long $500,000 BTC-PERP
UBO-Level Calculation
Apparent Margin: Viewed separately, each portfolio requires $50,000 (10%), for a total of $100,000.
UBO Calculation: Our system aggregates the total position: $500k (A) + $500k (B) = $1,000,000.
UBO Requirement: This $1M total position exceeds the $600k threshold which requires 15% IM. The required margin for the risk is $1,000,000 * 15% = $150,000.
UBO Excess Calculation
This is the equity you have available to withdraw or use for new trades.
Formula: Total Equity - True UBO Requirement = UBO Excess
Calculation: $1,000,000 - $150,000 = $850,000
Instead of reserving the $100,000, our system correctly reserves the $150,000 required for the total $1M position. The remaining $850,000 is your available UBO excess.
2. UBO Limit
The UBO Limit is a hard, pre-trade limit that constrains the total notional amount a UBO can trade across all their sub-portfolios.
How it works:
The limit applies to the maximum of your total long or total short notional, aggregated across all assets.
Example:
Your UBO Limit is $10 million.
You have Portfolio A (long $10M BTC) and Portfolio B (short $10M ETH).
Your max(long, short) notional is $10M, so you are at your limit.
If you then try to short an additional $5M in Portfolio B (for a total short of $15M), your new max(long, short) would be $15M. This trade would be rejected as it exceeds your $10M UBO Limit.
3. UBO Excess Sweep (Backstop Liquidation Step)
This is a critical step in our risk waterfall designed to protect the ecosystem. It ensures a UBO's own available capital is used to save a failing position before that risk is passed on to the market.
Trigger: A specific sub-portfolio's equity falls below its Close-out Margin (CoM) level, putting it at risk of immediate liquidation.
Action:
Check: Before liquidating the position, the system instantly checks the entire UBO for "excess capital." (Excess Capital = Total Equity across all sub-portfolios minus the Total UBO Margin Requirement).
Sweep: If excess capital exists in other sub-portfolios, it is automatically "swept" into the failing sub-portfolio.
Result: This capital infusion can bring the portfolio's health back to a safe level, preventing a liquidation and ensuring the UBO's own loss-absorbing funds are used first.