StarkEx Perpetual Trading overview

When you create a StarkEx-powered perpetuals exchange, you define the requirements for the initial margin and the maintenance margin.

The maintenance margin determines the amount of leverage that StarkEx enforces whenever executing a trade or liquidation transaction. When a position’s value falls below the maintenance margin, it is not well-leveraged. The maintenance margin is similar to total risk.

The application is responsible for enforcing the initial margin before sending a transaction to the StarkEx gateway. StarkEx enforces the maintenance margin.

The total value of a position is the sum of the value of the position’s collateral and synthetic assets, expressed in the collateral currency.

The total risk is a measurement that includes the total value of all synthetic assets in a position, and also takes into account a predetermined risk factor for each synthetic asset. As the risk factor increases, so does the total risk.

You, the operator, determine the risk factor according to your business logic, and include it in the general configuration for your StarkEx instance as the variable risk_factor. It is equivalent to the term maintenance margin rate (MMR), where MMR is expressed as a percentage. For example, if the MMR is 0.7%, then the risk_factor = 0.007.

Total risk is related to the maintenance margin as follows:

In the following examples, consider that Alice holds the following position:

The total value of Alice’s position is 86,500 USDC, calculated as follows:

500 + (4 * 20,000) + (6 * 1,000) = 86,500

To convert this value to a StarkEx internal value,

The total risk of Alice’s position is 40,600 USDC, calculated as follows:

(4 * 20,000 * 0.5) + (6 * 1,000 * 0.1) = 40,600

When Total_value >= Total_risk, StarkEx checks that the following is true:

Total_value * 2³² >= Total_risk

where

When Total_value_new / Total_risk_new >= Total_value_old / Total_risk_old, we actually check that Total_value_new * Total_risk_old >= Total_value_old * Total_risk_new.

The products (Total_value_new * Total_risk_old) and (Total_value_old * Total_risk_new) are both 224 bit integers.

A position must be well-leveraged. That is, \(\text{total_value} \ge \text{total_risk}\), which is another way of saying that the total value of a position must be above the maintenance margin.

If \(0 \lt \text{total_value} \lt \text{total_risk}\), you can liquidate the position without the position owner’s signature by matching the position to another trader’s signed limit order that would result in the position becoming well-leveraged.

If \(\text{total_value} \lt 0\), you can deleverage the position by matching it to another position that has the opposite balance with respect to some assets, without signatures from either position owner.

The following factors can affect a position’s balance, potentially causing a position to be liquidated or deleveraged: