Forced Loan Repayment, Credit Line Liquidation and Risk Unit Terms and Conditions

Product / Service Name

Current Status

Credit Line

✅

Institutional Loan

✅

Concept

Description

Example

MR%

Borrowers should proactively assess the risk level and debt repayment ability of accounts / sub-accounts within the Risk Unit, by reference to MR%.

The calculation formula is as follows:
Margin Ratio (MR%) = (Total Discounted Assets of the Risk Unit - Total Liabilities of the Risk Unit) / Total Liabilities of the Risk Unit

Using the examples in the rows below:

Total Discounted Assets of the Risk Unit = 7,276,250 + 5,000,000 = 12,276,250

Total Liabilities of the Risk Unit = 40 * 100,000 + 3,000,000 = 7,000,000

MR% = (12,276,250 - 7,000,000)/7,000,000 = 75.375%

Total Discounted Assets of the Risk Unit

The sum of the discounted assets of each account / sub-account within the Risk Unit.

Calculation of Total Discounted Assets:

1. Calculate the sum of each asset in each account / sub-account (inclusive of trading and funding accounts).

2. Multiply the above sum by a Discount Rate and Tier, applicable to each type of asset. Note that if the above figure for any asset is negative, then the full negative value is used for the purpose of the current calculation (i.e. the negative value is not discounted)

3. Convert the result for each type of asset to USDT

4. Calculate the sum of the abovementioned discounted assets

Note that any assets in isolated-margin in long option positions are excluded from the Total Discounted Assets calculation.

Note: Kindly refer to the [Image 1] and [Image 2] below

For the purpose of this example, assume current value of BTC is 100,000, current value of ETH is 2,600.

Discounted asset value of Main Account (in USDT value):
= (50 * 0.97525 * 100,000) - (1,000 * 1 * 2,600) + (10,000,000 * 0 * 0.2330) + (5,000,000 *1 * 1)
= 7,276,250

Discounted asset value of Sub-account 1 (in USDT value):
= (-50 * 1 * 100,000) + 10,000,000 * 1
= 5,000,000

Total Discounted asset value of the Risk Unit:
= 7,276,250 + 5,000,000
= 12,276,250

Total Liabilities of the Risk Unit

Sum of all liabilities in the Risk Unit.

For loans, liabilities takes into account principal, interest, and any other amounts owed.

Client borrows through Credit Line and Institutional Loan products:

Credit Line Liability (principal + interest): BTC 40
Institutional Loan Liability (principal + interest): USDT 3,000,000

Total Liabilities of the Risk Unit

= (40 * 100,000) + 3,000,000

= 7,000,000

MR% = 40%

This is the minimum Initial Margin Ratio (IMR) to open loan positions.

If MR% is equal to or less than 40%

Assets cannot be withdrawn from or transferred out of the Risk Unit

If MR% is equal to or less than 30%

This will trigger a Margin call, as described in the OKX Terms of Service.

If Borrower does not respond to a Margin call and the request to top-up within 24hours of the Margin call, the accounts within the Risk Unit may be be liquidated.

If MR% is equal to or less than 17%

This will trigger a liquidating warning.

If MR% is equal to or less than 15%

Assets will be liquidated to bring reduce the Total Liabilities of the Risk Unit to zero, or until no further assets remain within the Risk Unit for liquidation.

Steps

Example

1. Freeze borrower's accounts: Freeze all master and sub-accounts within the Risk Unit. Freezing results in the inability to transfer, trade, or withdraw all assets within the Risk Unit, until Forced Loan Repayment / Credit Line Liquidation is complete.

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2. Funding Account Repayment:

Funding accounts will be utilised for Forced Loan Repayment / Credit Line Liquidation , ahead of trading accounts.

Of the accounts within a Risk Unit, they are ordered for Forced Loan Repayment / Credit Line Liquidation from highest to lowest, based on the total USDT value of assets within each account.

Thereafter:

1. Within each account, assets and liabilities with the same currency are offset;

2. If liabilities remain, then assets are sold off to repay them. When selecting the cryptocurrency to be sold, assets with the least discount (for reference only, please refer to the Discount Rates table here) are typically prioritized for sale, in an effort to minimise the impact on the user's overall account equity. Assets with a Discount Rate of 0 will not be sold. Among assets with identical Discount Rates, assets with better liquidity are prioritized. Assets are first converted to USDT, then to the currency in which the liability is. USDT is used as an intermediate conversion asset due to its high liquidity and low slippage. Liquidity rankings are dynamically adjusted based on OKX Platform liquidity, and are not publicly disclosed;

3. Sold assets are used to repay liabilities, with loans in the most illiquid currencies being prioritized for repayment first.

Assume that an account has:

A liability of 10 BTC;

Assets of 4 BTC;

Additional ETH and SOL assets.

As an example of the same currency offset mechanism, the BTC assets are used for repayment, and a net 6 BTC liability remains;

As an example of repayment using liabilities and assets of different currencies, if the account continues to have a liability of 6 BTC, but no BTC assets, other assets are used. If the account has ETH and SOL, then ETH would be prioritised for sale. The ETH would be converted to USDT, and then again converted to BTC to pay off the remaining 6 BTC liability.

3. Trading Account Repayment：

In the event that liabilities still remain in the Risk Unit after the above, then trading accounts are utilised for Forced Loan Repayment / Credit Line Liquidation .

At the outset, all pending orders in a Risk Unit are cancelled.

Of the accounts within a Risk Unit, they are ordered for Forced Loan Repayment / Credit Line Liquidation from highest to lowest, based on the maintenance margin ratio of each account.

Thereafter:

1. Within each account, assets and liabilities with the same currency are offset;

2. If liabilities remain, then assets are sold off to repay them. When selecting the cryptocurrency to be sold, assets with the least discount (for reference only, please refer to the Discount Rates table here) are typically prioritized for sale, in an effort to minimise the impact on the user's overall account equity. Assets with a Discount Rate of 0 will not be sold. Among assets with identical Discount Rates, assets with better liquidity are prioritized. Assets are first converted to USDT, then to the currency in which the liability is. USDT is used as an intermediate conversion asset due to its high liquidity and low slippage. Liquidity rankings are dynamically adjusted based on OKX Platform liquidity, and are not publicly disclosed;

3. Sold assets are used to repay liabilities, with loans in the most illiquid currencies being prioritized for repayment first;

4. For each account / sub-account, initially, assets are sold and liabilities repaid to bring each account / sub-account within the Risk Unit to its IMR.

5. If liabilities still exist, then assets in each account / sub-account will continue to be sold and liabilities repaid to bring each account / sub-account within the Risk Unit to its maintenance margin ratio (MMR) (or a specific percentage of the maintenance margin ratio);

6. If the borrower then continues to have a liability, then then forced liquidation based on unified account liquidation rules will occur, as explained in this article.

Assume that after the above mechanism:

1. The account has a remaining liability of 5 BTC;

2. Sub-account A has assets of 1 BTC, and its IMR is 0.8 BTC, and its MMR is 0.5 BTC;

3. Sub-account B has assets of 1 ETH, and its IMR is 0.8 ETH, and its MMR is 0.5 ETH.

The repayment process would be as follows:

1. First, all pending orders in all trading accounts are cancelled;

2. Next, 0.2 BTC is transferred from sub-account A to OKX, in order to repay the loan up to the IMR of that sub-account. The residual liability is 4.8 BTC;

3. Thereafter, 0.2 ETH is transferred from sub-account B to OKX, in order to repay the loan up to the IMR of that sub-account. The 0.2 ETH is converted to USDT and then to BTC. Assume this results in 0.05 BTC. The residual liability is 4.75 BTC.

4. Given that 4.75 BTC of liability remains, forced liquidation based on the unified account liquidation rules would now occur.