Margin Calls
What is a Margin call?
Margin Call is a key risk management feature available for underwritten clients on Coinbase International Exchange. A margin call occurs when account equity falls below the maintenance margin requirement for a portfolio.
This feature provides clients with additional flexibility and control, offering a grace period to take corrective actions to meet margin requirements before liquidation processes commence. This allows clients to proactively manage their portfolios and avoid immediate liquidations during periods of market volatility.
Who is eligible?
Margin calls are exclusively available to institutional clients who:
Are underwritten by our credit risk team.
Have signed the required legal amendments through the Coinbase International Exchange User Agreement.
Have enabled the margin call feature for specific portfolios.
How Does a Margin Call Work?
Triggering a Margin Call:
Regular account evaluations are conducted to ensure margin requirements are maintained.
A margin call is triggered if equity falls below the maintenance margin or USDC charges are owed with no USDC collateral.
Notification of Margin Call:
You will receive a notification alerting you to deposit additional funds or take corrective action to restore equity levels.
Corrective Actions:
You can reduce positions or add funds to improve your portfolio’s health.
Note: Closing positions with margin offset are not allowed, given this would increase risk of your portfolio.
Alternatively, you can wait for the market to improve while remaining in the margin call state.
Time to remediate: Clients have a default period of up to 6 hours to address the margin deficiency.
Post-Margin Call Outcomes:
If equity is restored, within the remediation period, you will exit the margin call state.
Failure to cure the margin call may lead to liquidation of your positions.
How to Avoid Margin Calls
Here are steps to prevent margin calls:
Regularly monitor your account equity levels.
Maintain an adequate equity buffer above the required maintenance.
Spread risk across different assets and reduce the impact of volatile market movements on your portfolio.
Proactively deposit funds to stay above margin requirements.
Notifications
Coinbase International Exchange provides real-time notifications throughout the margin call lifecycle:
Entry: Notification when a margin call is triggered.
Expiry: Alerts if the grace period ends without corrective action. This results in automatic partial liquidation of your positions to restore equity to required levels.
Exit: Confirmation when equity is restored above the required levels.
Which notifications should I expect?
You will receive email notifications when:
your portfolio enters a margin call
your portfolio exits a margin call due to actions taken
your portfolio exits a margin call due to early termination
your portfolio exits a margin call due to liquidation
How long is my margin call?
The standard margin call period is up to 6 hours.
How can I cure my margin call?
Clients can perform risk-reducing actions such as closing positions or depositing funds during margin calls. Clients may wait for the market to recover as well.
What are the liquidation triggers for margin calls?
Your positions will be liquidated during the margin call period if your portfolio has negative equity. At this time, your portfolio’s margin call expires and we begin liquidations.
If your portfolio has a margin call, and has negative equity, any excess funds at the Ultimate Beneficial Owner will be used to improve your portfolio’s health before processing liquidations. Collateral transfers from other portfolios only occur when your portfolio’s equity is below Close out Margin, and has negative equity.
What margin level cures my margin call?
Your portfolio’s equity must be above your portfolio’s initial margin to exit margin call.
Which liquidations are delayed?
Liquidations for portfolio health (when equity drops below maintenance margin)
Liquidations for USDC charges, if you do not have USDC
PnL Settlements
Funding payments
Trading fees
What does my margin call amount mean?
Your margin call amount represents the amount owed for delayed liquidations. Your margin call amount is constantly evaluated throughout your margin call, and may change based on market conditions or actions you take on your portfolio.
Liquidations for portfolio health (when equity drops below maintenance margin)
Margin Call Amount: Total Initial Margin - Total Equity
Liquidations for USDC charges, if you do not have USDC
Margin Call Amount: = PnL Settlements + Funding payments + Trading fees
When adding funds to exit your margin call, funds deposited must be USDC
Can I exit a margin call in one portfolio by moving excess funds from a healthy portfolio?
Yes, this can be a method for curing a pending margin call. However, it is important to note that clients should ensure that moving excess funds from one portfolio to another, does not negatively impact their other portfolios. We will also not allow portfolio to portfolio transfers for funds that are not considered excess of margin requirements.
What are the implications for my loans?
During an active margin call, we will not allow clients to take new loans.
We will process automatic repayments on your loan, when your portfolio equity is less than the initial margin requirement.
If you deposit or earn USDC credits during an active margin call, we will use these funds to repay your loan, only if your portfolio’s equity is less than initial margin.
How much can I withdraw during a margin call?
When an active margin call is present in one portfolio, other portfolios may continue to actively trade or withdraw, as long as the Ultimate Beneficial Owner has enough funds to satisfy initial margin requirements.
What happens if my portfolio has negative equity?
Your portfolio will be liquidated immediately, even if your portfolio has an active margin call. At this time, your portfolio will exit the margin call and be de-risked immediately through our liquidation waterfall.
API Endpoints
https://docs.cdp.coinbase.com/intx/docs/upcoming-changes#margin-call
If you have questions or require assistance, contact your Sales or Account Manager.
Examples
What happens to my portfolio without margin calls enabled?
When Equity drops below Initial Margin, your portfolio is in risk reducing only mode
Healthy: Equity is above Initial Margin
Risk Reducing Only: Equity is below Initial Margin and above Maintenance Margin
Add Funds: Client deposits more funds
Healthy: Equity is above Initial Margin
When Equity drops below Maintenance Margin, your portfolio is liquidated immediately
Healthy: Equity is above Initial Margin
Liquidation: Equity is below Maintenance Margin = Auto-Liquidation
Healthy: Equity is above Initial Margin
When Equity drops below Close out Margin, your portfolio is liquidated immediately
Healthy: Equity is above Initial Margin
Liquidation: Equity is below Close out Margin = Liquidation Waterfall
What happens to my portfolio with margin calls enabled?
When Equity drops below Maintenance Margin and Close Out Margin, and you add more funds to your portfolio before the margin call expires
Healthy: Equity is above Initial Margin
Margin Call: Equity is below Maintenance Margin
Margin Call: Equity is below Close out Margin
Add Funds: Client deposits more funds
Healthy: Equity is above Initial Margin
When Equity drops below Maintenance Margin and Close Out Margin, and you do not add more funds to your portfolio before the margin call expires
Healthy: Equity is above Initial Margin
Margin Call: Equity is below Maintenance Margin
Margin Call: Equity is below Close out Margin
Liquidation: Equity is not above Initial Margin once margin call expires
When Equity drops below Maintenance Margin, and you add more funds to your portfolio before the margin call expires
Healthy: Equity is above Initial Margin
Margin Call: Equity is below Maintenance Margin
Add Funds: Client deposits more funds
Healthy: Equity is above Initial Margin
When Equity drops below Maintenance Margin, and you do not add more funds to your portfolio before the margin call expires
Healthy: Equity is above Initial Margin
Margin Call: Equity is below Maintenance Margin
Liquidation: Equity is not above Initial Margin once margin call expires
When Equity drops below Zero (Negative Equity) before the margin call expires
Healthy: Equity is above Initial Margin
Margin Call: Equity is below Maintenance Margin
Negative Equity: Immediate Liquidation