Initial Margin

The initial margin is a concept similar to the maintenance margin. The maintenance margin requirement determines whether an account should be liquidated (liquidation check), while the initial margin requirement determines whether a position can be opened (availability check). The formula are as follows:

(Total Collateral Value - Total Net Debt Value) > Initial Margin Requirement

Initial Margin Requirement = Initial Margin Ratio * Net Debt

The initial margin ratio is calculated based on the maximum leverage set by the HTX risk management team when an account opens a position. Initial margin ratio = 1/(maximum initial leverage - 1).

For example, an account holds 100 USDT and is planning to buy 300 USDT worth of ABC. The collateral weight is 0.9 for ABC asset value between 0 and 5,000 USD. The initial margin requirement is 50%. Does the trade satisfies initial margin requirement?

To fill the order, 200 USDT needs to be borrowed in order to buy 300 USDT worth of ABC.

Equity after the trade: (300 * 0.9 - 200) = 70 USDT

Initial margin requirement: 200 * 50% = 100 USDT

70 is less than 100, therefore this position cannot be opened.

The initial margin requirement is 50% and the maximum allowable leverage is 3x. The leverage will already be 3x if this account holds 100 USDT and borrows 200 USDT, but the collateral weight of 0.9 will make the post-trade equity inadequate, therefore this trade will not be approved.