Our margining system is set up such that with a high degree of certainty, every counterparty posts sufficient margin to cover potential losses from sudden price swings.
We achieve this through independent margin accounts for each instrument type. The total portfolio value of each margin account is continuously estimated and compared to the margin requirement arising from the open positions and open orders in that margin account.
The following sections describe how portfolio value and margin requirements are calculated and what happens if portfolio value falls short of margin requirements.
The Instant Margining System (IMS) uses two different margin parameters to manage the credit risk of margin accounts. Each parameter is associated with a certain margin requirement per open long or short position and triggers certain action when reached:
|INITIAL MARGIN (IM)||This is the margin that is required to open new positions. If the portfolio value of a margin account falls below IM, all open orders that would further add to the risk of this margin account are cancelled immediately. Before any new positions can be opened, additional funds must be deposited into the margin account to bring portfolio value back above IM. Alternatively, some existing positions can be closed out.|
|MAINTENANCE MARGIN (MM)||This is the margin that is required to maintain open positions. If the portfolio value of a margin account falls below MM, then the liquidation procedure begins.|
Order system and trade counterparty
If you offer to trade an instrument on the platform, this offer is matched by the trading system with another client's offer to take the other side of that trade. This means that Kraken Futures does not act as trade counterparty.
Kraken Futures has discretion over whether any offer to buy or sell is successfully accepted, matched or executed and we may choose at our discretion to refuse an order and such refusal is notified to you. This is to ensure that trades do not lead to market manipulation or other unfair circumstances.
Open positions can be exited before maturity by submitting a buy or sell order that closes the position (i.e. if you have a long position you sell, if you have a short position you buy back). The party with which you do the exit trade will then take over your obligations in relation with your original counterparty.