Tiered Margin

Tiered margin is a system where margin requirements increase as the size of a position grows. This is designed to discourage excessive concentration of risk by large traders.

Smaller positions enjoy lower margin requirements, making it easier for retail participants to trade, while larger positions require more collateral to protect the exchange against the impact of a potential large-scale liquidation. This tiered structure helps manage the risk profile of the entire platform by ensuring that the most significant risks are backed by proportionately larger amounts of capital.

It is a standard practice in mature derivative markets.