Margin

The margin fractions define the leverage permitted by Nord. Each market has different base fractions based on factors such as the risk and volatility of the underlying asset.

Margin fractions

Margin fraction $\text{MF}$

Calculated per user as:

$$\text{MF}_{user} = \frac{\text{AV}}{\sum_{markets} \text{PN}}$$

Open margin fraction $\text{OMF}$

$$\text{OMF}_{user} = \frac{\min\big\{\text{AV}, \text{TV} \big\}}{\sum_{markets} \text{PON}}$$

OMF is the ratio between the account's available collateral value and its possible exposure after open orders fill. The numerator includes unsettled funding.

Initial margin fraction $\text{IMF}$

Defines the initial margin to open a position or borrow assets. After opening a position or borrowing an asset, we must have $\text{OMF}_user > \text{IMF}_user$. First, define a per-market or per-asset base IMF.

$$\begin{align*} \text{IMF}_\text{base} &= \frac{1}{\text{max leverage}} & (\text{perp}) \\ \text{IMF}_\text{base} &= \frac{1.1}{\text{weight}_\text{base token}} - 1 & (\text{spot}) \end{align*}$$

where

• $\text{max leverage}$ is the maximum leverage multiplier for a specific market. The implementation may operate with the market's $\text{imf}$ value, in which case:

$$\begin{align*} \text{IMF}_\text{base} &= {\text{imf}_\text{market}} & (\text{perp}) \end{align*}$$

• $\text{weight}$ is the weight of the spot market's base token.

Note that in practice, we need only store the market IMF and token IMF. The leverage is implied from this value. Then we have the user's IMF.

$$\text{IMF}_{user} = \frac{\sum \text{PON} \cdot \text{IMF}_\text{base}}{\sum \text{PON}}$$

Note that for tokens, $\text{IMF}_\text{base}$ is only defined if the token is borrowable.

Because OMF and IMF have the same denominator, the condition $\text{OMF} > \text{IMF}$ can be simplified to:

$$\min\big\{\text{AV}, \text{TV} \big\} > \sum \text{PON} \cdot \text{IMF}_\text{base}$$

Let us use $\text{OMF\_numer} = \min\{\text{AV}, \text{TV}\}$.

Cancel margin fraction $CMF$

The $OMF$ below which open orders that extend the user's current position are cancelled. Defined similarly to IMF.

$$\begin{align*} \text{CMF}_\text{base} &= \frac{5}{8} \text{IMF}_\text{base} & (\text{perp}) \\ \text{CMF}_\text{base} &= \text{IMF}_\text{base} & (\text{spot}) \end{align*}$$ $$\text{CMF}_{user} = \frac{\sum \text{PON} \cdot \text{CMF}_\text{base}}{\sum \text{PON}}$$

Maintenance margin fraction $MMF$

The MF threshold below which the user's positions and borrows become eligible for liquidation.

$$\begin{align*} \text{MMF}_\text{base} &= \frac{1}{2} \text{IMF}_\text{base} & (\text{perp}) \\ \text{MMF}_\text{base} &= \frac{1.03}{\text{weight}} - 1 & (\text{spot}) \end{align*}$$ $$\text{MMF}_{user} = \frac{\sum \text{PON} \cdot \text{MMF}_\text{base}}{\sum \text{PON}}$$

Invariants

If a user can perform a financial operation by executing two separate actions sequentially, then the equivalent financial operation performed as a single action must also succeed. For example, if a user can close a position and then open an opposite position, they must also be able to perform this as a single, atomic operation.

Price bands

Nord rejects perpetual order requests with a limit price outside a configured band around the index price. With band $B$, the lowest permitted price is $p_\text{low index} \cdot (1 - B)$ and the highest permitted price is $p_\text{high index} \cdot (1 + B)$. Currently, $B = 0.2$.