SolBank Cross Margin

Tap into the capital efficiency of universally cross-margined accounts.

At SolBank, cross-margining is the default mode, consolidating a user's trading account liabilities to balance margins between positions. Consequently, a user's portfolio serves as collateral across various open positions.

Your portfolio doubles as margin on SolBank.

Universal cross-margining in trading accounts is a rarity within DeFi. Therefore, it's crucial to differentiate between two distinct types of margin:

1. Isolated Margin:

   • Involves limiting an account's liability to the initial margin posted for a single position.

2. Cross-Margin:

   • Entails sharing liabilities across multiple positions within an account to offset the margin between them.

Isolated Margin

Isolated margin is often used for volatile, speculative positions and limits a user’s account balance risk. Isolated margin is popular for perpetuals trading on both DEXs and CEXs.

For instance:

"Let's consider Alice, who holds 20K USDC on Binance.

Alice decides to open a $BTC perpetual position valued at $50K, utilizing 10X leverage and 5K of her USDC as collateral.

Unfortunately, Alice's position gets liquidated.

In this scenario, only the initial margin of 5K USDC is exposed to potential loss, leaving her remaining 15K USDC unaffected."

While isolated margin functionality is not initially available on SolBank V1, it will be introduced as a feature for users in SolBank V2.

Cross-Margin

Cross-margining empowers users to minimize margin requirements by assessing the overall risk of their portfolio across multiple positions. Capital from open positions is distributed towards meeting the margin requirements of each position, thereby reducing the likelihood of liquidation for individual positions while necessitating a lower initial margin for each.

Although cross-margining is widely adopted in Traditional Finance (TradFi) and available on numerous Centralized Exchanges (CEXs), its implementation in DeFi is limited.

On SolBank, you can maximize the utilization of all your funds—deposits, positions, and profit and loss (PnL)—towards your margin. This implies that your open positions across spot, perpetuals, and the money market (e.g., spot borrowing) contribute to your account's portfolio margin.

With this approach, users can trade with greater flexibility and efficiency, as the risk of margin calls and forced liquidations for individual positions diminishes.

SolBank's cross-margin design also facilitates portfolio margining. Similar to traditional cross-margining, portfolio margining allows unrealized profits to offset unrealized losses or be utilized as margin for existing or new positions. The SolBank backend automatically calculates all relevant balances of a portfolio's margin and presents them intuitively as the trading account's portfolio health within the SolBank app.