Explanation of Leverage Tiers

Venkate's perpetual contracts employ leverage tiers for all trading accounts to reduce the likelihood of large-scale forced liquidations.

When users hold substantial positions, they pose a risk to other users. If their positions are forcibly liquidated, others may experience automatic deleveraging events. The incremental leverage tier model helps mitigate this risk by increasing margin requirements for large positions.

Larger positions require higher margin levels: When large positions are forcibly liquidated, there is a risk of not being able to liquidate them safely, impacting the market. Venkate's liquidation engine can use more margin to efficiently liquidate substantial positions.

If liquidation is triggered, Venkate will cancel all unfilled orders for that contract to free up margin and maintain the position. Orders for other contracts are unaffected.

Venkate uses a partial liquidation method to gradually reduce positions, which helps to decrease the maintenance margin requirement and avoid full position liquidation.

Dynamic Leverage Tiers: Each contract has a base leverage limit and incremental amounts. These parameters, combined with the base maintenance and initial margin requirements, are used to calculate the complete margin requirement for each position.

As the position size increases, the maintenance and initial margin requirements also rise. The margin rate will increase or decrease with changes in leverage tiers.

Modifying Leverage: Currently, users can modify different leverage ratios for both long and short positions. They can change the leverage ratio under isolated margin mode to any desired amount. The success of this change depends on the maximum leverage tier allowed.

Venkate uses a partial liquidation method to gradually reduce positions, which helps to decrease the maintenance margin requirement and avoid full position liquidation.

For Users with Minimum Leverage Tiers: Venkate will cancel all unfilled orders for the contract. If the maintenance margin requirement is still not met, the liquidation engine will take over the position at the bankruptcy price.

For Users with High Leverage Tiers: The liquidation engine will attempt to lower the user's leverage tier to reduce the margin requirement by:

• Canceling unfilled orders but retaining the existing position, thereby lowering the user's leverage tier.
• If the position is still in liquidation, the entire position will be taken over by the liquidation engine at the bankruptcy price.