Risk Exposure Limits while Trading Derivatives

Bullish will have controls in place for our derivatives products to manage and mitigate the concentration risk of any specific account relative to the total open interest of a particular contract.

There are multiple controls, each configured per contract.

Open Interest Notional Limit

This control ensures that any new incoming order for a contract does not cause the contract’s Open Interest to exceed a specified notional value.

This limit is defined by OpenInterestLimitUSD per contract.

How does it work ?

The Contract Open Interest Notional refers to the cumulative notional of all the open interest (where longs = shorts) that belong to a contract. If a new incoming order causes the Contract’s Open Interest Notional OpenInterestLimitUSD, the order will be rejected.

In summary, the Open Interest Notional Limit is a risk control measure to prevent excessive open interest in any given contract, thereby maintaining market stability and managing risk exposure.

Account Concentration Risk per Contract

This control is designed to prevent an individual account from exceeding a predefined percentage of the Open Interest (OI) for each contract when sending new orders.

This is achieved using the combination of ConcentrationRiskThresholdUSD and ConcentrationRiskPercentTotal.

ConcentrationRiskThresholdUSD is the exchange threshold for a specific contract in USD.
ConcentrationRiskPercentTotal represents a percentage of the total Open Interest for that contract.

How does it work ?

The system checks the Account Open Interest Notional for a contract against the Max(ConcentrationRiskThresholdUSD , ConcentrationRiskPercentTotal of Contract Open Interest Notional)]
If a new incoming order causes an increase in the percentage of OI beyond this threshold, the order is rejected. Conversely, if the order results in reducing the percentage of OI, it is allowed to go through.
If a new incoming order causes the Contract’s Open Interest Notional to exceed the OpenInterestLimitUSD, the order will be rejected.

This control is designed to limit the increased risk created by new incoming orders and keep such orders within predefined limits associated with a contract

Note: Only position increasing orders for contract are subject to go through the above checks.

Note: Both API and UI Users will be notified with a specific reject reason corresponding to the respective controls.

Important: These limits are subject to change at any time.

Where can I see these limits?

To view the limits:

Go to the Reference tab of the web application.
Choose View contract details on the Perpetual market to see the contract specifications.

API users can see it on the markets endpoint as outlined within the API docs.