Margin Call

A Margin Call is an early warning mechanism triggered when a Margin Account's Risk Factor approaches the Liquidation Threshold, signaling that the portfolio is under stress but not yet unsafe enough to be liquidated.

It provides the Asset Manager (Borrower) with an opportunity to restore their account health before Liquidation occurs.

How Margin Call Works

1. Risk Breach Detection

   • The Margin Engine detects that the Risk Factor is nearing critical levels.

   • The Margin Call status is flagged internally in the system.

2. Notification to Asset Manager

   • Asset Managers are notified via:

     • Arkis Web Portal

     • Email

     • Real-time alerts via Arkis API (for connected trading systems)

3. Grace Period for Action

   • The Asset Manager is expected to either:

     • Top up collateral with whitelisted tokens, or

     • Reduce borrowings (i.e., repay a portion of the debt), or

     • Reduce risk by closing positions that are volatile or underperforming.

4. Monitoring

   • The Margin Engine continuously monitors whether the account’s Risk Factor improves.

   • If no action is taken and Risk Factor drops below the Liquidation Threshold, liquidation is initiated automatically.

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Example

• Borrowed: $10,000 USDC

• Stress-Tested Value of Portfolio: $11,200

• Risk Factor = 1.12

If:

• Margin Call Threshold = 1.15

• Liquidation Threshold = 1.00

➡️ A Margin Call is triggered. ➡️ Asset Manager has time to adjust before the account becomes eligible for liquidation.