Margin System
Overview of Backpack’s Margin System
Backpack’s margin system is designed to be simple and resilient. At a high level you:
keep one pool of collateral,
earn yield on idle balances,
borrow automatically when you need to,
and isolate risk with sub-accounts.
For full technical details, see the Margin docs
Unified cross-margin. Your eligible assets (spot balances, perps margin, lending balances) live in one collateral pool, so you don’t have to shuffle funds between products.
Sub-accounts for risk isolation. Create independent sub-accounts. Each has its own collateral, PnL, and margin—so a mistake in one doesn’t spill into another.
Fewer transfers, more utility. Because funds are pooled, you can deploy capital quickly without moving assets around.
Collateral Rules
How collateral is valued. Collateral Value = Quantity × Mark Price × Collateral Weight (a haircut).
Weights vary by asset (more volatile/less liquid → lower weight).
Size tiers / concentration controls: very large balances may receive a lower marginal weight to limit concentration risk.
Dynamic updates: weights can change with market/liquidity conditions; see the live table here for current values.
👉For more details about Collateral, please refer to the Collateral and Non-USD Collateral sections in the technical docs.
Equity & Margin Terms
Net Equity = Total Collateral Value + Unrealized PnL + Unsettled Balances − Borrowed Liabilities. Available Equity = Net Equity − Locked Equity (reserved for open orders/positions).
IMR (Initial Margin Requirement). Measures how much equity is committed to current exposure.
At 100% IMR, you can’t increase exposure (no new/size-up positions).
MMR (Maintenance Margin Requirement). Minimum equity required to keep positions open.
At 100% MMR, liquidation protection triggers.
👉 For full formulas and examples, see the the Equity and Margin sections in the technical docs
Yield & PnL
Auto-lend. Eligible assets in your margin wallet can be lent into the pool and accrue yield while still counting as collateral. Rates vary with pool utilization.
PnL treatment. PnL is continuously realized and flows into Net Equity without requiring you to close positions. Profits increase usable equity; losses reduce it.
Interest interactions. Borrowed balances accrue interest continuously; surplus balances may earn via auto-lend. Funding paid/received on perps posts to PnL and therefore Net Equity each interval.
👉See the Settlement and Realization page for more detailed information
Borrowing
Auto-Borrowing: When executing trades that exceed available balances (e.g., short-selling), the system automatically borrows the deficit from the lending pool.
Manual Borrowing: Users can manually borrow assets via the borrow/ lend interface.
Repayment Methods:
proceeds from auto-lend,
repurchasing the borrowed asset, or
manual repay in the Borrow dashboard.
👉For more information about how Borrowing and Lending works, refer to the technical docs here
Transparent Risk Engine
Dynamic Interest Rates: Borrowing costs adjust based on pool utilization — higher utilization drives higher rates.
Public parameters: collateral weights, IMR/MMR thresholds, and rate curves can be found here
Real-time monitoring: positions and margin health are checked continuously using mark prices from exchange/oracle sources.
Liquidation flow
Trigger: when MMR reaches 100%.
Partial first: the system reduces exposure incrementally to restore margin health.
Orderbook then backstop: liquidations route through the orderbook first; any remainder can be closed to backstop liquidity providers.
Important Update (Effective October 6, 2025 — 07:00 UTC)
We’re introducing a liquidation fee.
Rate: 1% on all system-triggered perps and borrow/spot-margin liquidations.
Scope: Applied only to the filled amount of each liquidation order (per fill).
Unchanged: Regular user trades and fees are unaffected.
If you have any questions, please reach out to [email protected].
Frequently Asked Questions
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