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

Account & Efficiency

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 & Capital

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

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

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

Risk & Liquidation

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

Why is my 50x maximum leverage not taking effect?

The 50x leverage setting may not apply if the trading pair has its own maximum leverage limit or if additional risk parameters are in place. Please check the leverage limits for the specific market you are trading.

Why am I unable to open a position even though my account has sufficient funds?

• In such cases, it is usually because the remaining net equity in your account is insufficient to support the minimum margin requirement for the new position. You may try reducing the position size to open a new position until your account’s IMR equals 100%.

• Once your account margin ratio reaches ≥ 100%, you will no longer be able to open new positions.

Why does my account still have a balance after liquidation (partial liquidation)?

• This happens because Backpack utilises a gradual liquidation mechanism. When your Maintenance Margin Ratio (MMR) exceeds 100%, the system will attempt to minimize losses by liquidating only the portion necessary to restore your account to a healthy state. (By contrast, some exchanges may fully liquidate your position at this point.)

• However, please note that if the market continues moving against you for a prolonged period and you do not add collateral, or close your position in time, even partial liquidations may continuously erode your funds until the balance is fully depleted.

Why was my position liquidated even though it was still far from the estimated liquidation price?

• The estimated liquidation price is only a reference. Actual liquidation is triggered when MMR ≥ 100%.

• In addition, Backpack follows a cross-margin model, where all positions within a sub-account share the same margin balance, and PnL from different positions can offset each other. If the sub-account holds complex positions (e.g., borrowing, using another asset as margin while also shorting it), the system may not be able to provide an accurate estimated liquidation price, since multiple factors influence the calculation and the functions involved are relatively complex.

How are liquidation fees charged

A 1% Liquidation fee is charged per order-book conversion when the system liquidates your account (deducted from proceeds; not charged on user-closed positions).

How can I view liquidated positions?

• If a borrow position was liquidated, please visit: https://backpack.exchange/portfolio/borrow-lend/liquidations

• If a futures position was liquidated, please visit: https://backpack.exchange/portfolio/futures/liquidations