Coinmerce may offer Spot Margin Trading to eligible Clients. Spot Margin Trading allows Clients to borrow Crypto-Assets from Coinmerce in order to enter into transactions involving the sale and subsequent repurchase of those Crypto-Assets. The resulting profit or loss arises from executed exchange transactions rather than from any synthetic or contractual exposure to the price of a Crypto Asset. Spot Margin Trading involves significant additional risks beyond those associated with regular Exchange Services. Clients should not use Spot Margin Trading unless they fully understand these risks.
The Spot Margin Trading service is governed by the Spot Margin Terms and Conditions, which should be read carefully before opting in. The borrowing component of Spot Margin Trading is not a crypto-asset service regulated under MiCAR. This means that certain safeguards applicable to regulated crypto-asset services may not apply to all aspects of this service.
Loss risk
When taking a short position, the Client borrows Crypto-Assets and sells them with the intention of buying them back at a lower price. If the price rises instead of falls, the Client incurs a loss. The Client's maximum loss is limited to the collateral posted (the Initial Margin). The Liquidation mechanism is designed to close the position before losses exceed this amount. The Client will not owe Coinmerce any residual amount if the collateral proves insufficient.
Liquidation risk
If the Position Risk Ratio of a Margin Position falls below the required threshold, or if another Liquidation trigger occurs, Coinmerce may immediately close (by means of liquidation) the position without prior notice. Due to the speed and severity of price movements in Crypto Asset markets, Liquidation may occur rapidly and at a price that differs materially from the last price observed by the Client. Coinmerce does not guarantee that Liquidation will occur at or near the theoretical Liquidation threshold. The Client is solely responsible for monitoring the Position Risk Ratio of their Margin Positions at all times. Coinmerce strives, but is not responsible nor obliged to, send notifications when the Position Risk Ratio approaches a critical level. The Client should not rely on receiving such notifications. Clients should remain aware that their position may be liquidated automatically if the required thresholds are not maintained.
Liquidation pricing
Liquidation Transactions are bilateral exchange transactions in which Coinmerce acts as the Client's counterparty. Liquidation Transactions are executed at the prevailing Base Market Price plus a risk premium, without the standard two-minute validity window that applies to voluntary Exchange Offers. In addition, a Liquidation Fee applies. The price at which a Liquidation is executed may be significantly less favourable than the price the Client could have obtained by closing the position voluntarily. Further details are set out in the Pricing Methodology and the Fee Schedule.
Borrowing Fee risk
A Borrowing Fee accrues every 4 (four) hours on each open Margin Position. Coinmerce may adjust the Borrowing Fee at any time, including during the term of an open Margin Position after prior notification. An increase in the Borrowing Fee reduces the profitability of the position. The Client should factor in the ongoing cost of borrowing when deciding whether to open or maintain a Margin Position. Current Borrowing Fee rates per Crypto Asset are published on the Fee Schedule.
Availability risk
Coinmerce may restrict, suspend, or terminate the Spot Margin Trading service - in whole or in part, and for all or individual Clients - at any time and at its sole discretion. In such cases, the Client may be required to close Margin Positions at short notice and under potentially unfavourable market conditions. If the Client fails to close its positions within the period specified by Coinmerce, Coinmerce may proceed to Liquidate any remaining open Margin Positions.
No modification of open positions
Once a Margin Position is opened, the Client cannot adjust the position size or add additional collateral. The Client can only close the position in full. This means the Client cannot reduce Liquidation risk on an existing position by posting additional margin.