1. General Rules
1.1 In order to standardize the leveraged trades and leveraged loans of cryptocurrency assets, maintain market order, and protect the legitimate rights and interests of investors, these rules were formulated in accordance with the principles of fairness, openness, and impartiality.
1.2 These rules are the benchmark for Sherolex's leveraged trading business, including statement of investors’ borrowing, trading and other operations in the leverage market.
2.1 In isolated leverage mode, each trading pair has a specific isolated margin account. The net asset in each isolated margin account can only be used as a margin for the specific trading pair.
2.2 Each isolated margin account can only accept the underlying currency and the denominated currency in its specific trading pair as margin.
3 Assets Borrowing
3.1 In isolated leverage mode, users can only borrow two specific currencies under the current trading pair as loan assets. For more details, it can be referred to https://www.sherolex.com/margin-fee .
3.2 In order to ensure the safety of the assets, Sherolex has the right to adjust the upper limit of assets borrowing and trade permission of the borrowed assets in each isolated margin account.
4. Borrowing Rules
4.1 The maximum borrowable limit in an isolated margin account refers to the largest borrowable amount in the specific isolated margin account. The system will calculate the user's maximum amount allowed to borrow based on restrictions including the amount in isolated leverage, amount allowed to borrow, the risk control rules of the platform, and others.
In this rule, the maximum amount a user can borrow = min (net assets in each isolated margin account * (maximum leverage in the corresponding isolated margin account -1) - assets to be refunded , the maximum amount Sherolex platform can loan）
4.2 The loan digital assets will be transferred to the user's corresponding isolated leveraged account instantly once the user has borrowed successfully, and the system will start to calculate interest forthwith. Users can use the borrowed digital assets to conduct leveraged trades in the corresponding isolated leveraged trading pairs.
4.3 The rules for borrowing on Tiered leverage ：the system adjusts the effective margin level based on the amount of the funds borrowed by a user. Thus, the corresponding initial risk ratio and liquidation risk ratio will vary. Herein, there are 10 tiers for 10x margin and 5 tiers for 5x margin. For more information, please refer to the Tiered Leverage Function article.
5. Borrowing Rate Calculation Rules
5.1 Interest calculation rules: interest is calculated on an hourly basis. If funds are borrowed for less than 1 hour, the interest rate will still be calculated as for assets borrowed for 1 hour. Interest calculation starts from actual borrowing time, which means borrowing time will be counted as 1 hour after assets borrowed successfully, and will be counted as 2 hours until the next hour.
The calculation formula: I (interest) = P (borrowed money/principal) * R (daily interest/24) * T (in hours)
5.2 User can repay the loan in advance, and pay interest according to the actual borrowed hour, if less than 1 hour, the interest is calculated for 1 hour. When repaying the loan, the user pays the interest rate value first, then principal.
5.3 The unrepaid interest is included in the margin level calculation. If the interest is not repaid for a long time, it may cause the margin level of the user's current isolated leveraged account to drop below the liquidation line, resulting in the position being closed forcedly. Users may choose to pay off the interest periodically or leave enough available balance in the current isolated leveraged account.
5.4 Margin account interest rates may be adjusted from time to time. The latest interest rate can be referred to https://www.sherolex.com/margin-fee.
5.5 Automatic borrowing rule: users can use the automatic borrowing function on the isolated leveraged trading page.
6. Repay Rules
6.1 Users can manually select to repay the loan assets partially or entirely. Interest will be repaid firstly, then principal. The system will calculate interest based on the latest borrowed quantity in the next hour.
6.2 Debt repaying: when repaying the debt, users may use the same currency as borrowed to repay and other currencies are not allowed to repay the debt instead. Therefore, users may need to ensure that there are enough assets of the borrowed type in the current isolated leveraged account when repaying.
6.3 Automatic repayment rules: users can use the automatic repayment function on the leverage trading page. With users choosing this function and placing orders, the system will automatically use the obtained funds once the orders are filled completely to repay debt. Automatic repayment will only be executed after the order is fully filled. Should funds gained via a fully filled order be insufficient to repay the debt, the system will select to repay 90% of the debt automatically, leaving the rest to be repaid by the user manually.
7. Risk control
7.1 The net assets in the user‘s isolate margin account only can be used as the collateral in the corresponding account, and the assets in the user's other accounts(cross margin account or other isolated accounts) couldn't be calculated as collateral for it.
7.2 Sherolex has the right to monitor the margin level (hereinafter referred to as ML) of the user's isolated margin account in real-time and take corresponding measures according to the change of margin level.
In this rule, the margin level of the isolated account = the total value of assets under the isolated account / (total value of liabilities + unpaid interest)
Among them, the total value of assets = the total value of the underlying assets + nominal assets in the current isolated account
Total liabilities = The total value of the assets that have been borrowed but not returned in the current isolated account
Unrepaid interest = （the amount of each loaned asset * the time length of the loan * hourly interest rate）- repaid interest
7.3 Margin level and Operation
When the Margin Level (hereinafter referred to as ML)> 2, users can trade, can borrow, and the excess assets in the account can also be transferred to other trading accounts. But the ML still needs to equal or greater than 2 after transferring out to ensure normal asset transferring out functions.
・Initial Ratio (IR)
IR is the initial risk rate after the user borrows, and there are different IRs according to different leverage. For example, the IR will be 1.5 under the 3x leverage with full borrowing, the IR will be 1.25 under 5x leverage with full borrowing and the IR will be 1.11 under 10X leverage with full borrwing.
・Margin Call Ratio ( MCR )
When MCR <ML ≤ 2, users can trade and borrow, but cannot transfer assets out
The MCR will be different according to different leverage. For example, the MCR for a 3x leverage is 1.35, for 5x leverage, it will be 1.18 and for 10x, it will be 1.09.
・Liquidation Ratio (LR )
When LR <ML ≤ MCR, a margin call will be triggered. The system will send notifications with an email, SMS, website reminder, suggesting the user add a margin (that is, transfer more collateral funds) to avoid the risk of liquidation. After the first notice, the notifications will be sent every 24 hours. If ML≥MCR later, the user will not receive next notification
When ML ≤ LR, the system will execute the liquidation process. The assets held in the account will be forced to sell to repay the loan. At the same time, users will be notified via email, SMS, and website reminder.
LR will vary according to different leverages. For example, the LR for 3x leverage is 1.18, for 5x leverage, it is1.15 while for 10x leverage, it is 1.05.
7.4 Users should pay attention to the risk of margin trading and adjust the position in time to avoid risk. All losses caused by the triggering of liquidation in the margin account are borne by the users themselves, including but not limited to: due to the dramatic price fluctuation, the ML of the isolated account has reached the MCR line and quickly reached the LR line, so that the user fails to take corresponding measures in time after receiving the prompt message sent by the system.
7.5 Sherolex will carry out intelligent risk management on leveraged trades and risks. When leveraged trades or loans on the platform enter the scope of intelligent risk warning, the platform will take measures to prevent greater risks, including but not limited to: prohibition on transfer, on long, on short, on leverage trades and liquidation.
7.6 Sherolex will adjust the personal maximum leveraged loan amount and total platform loan amount according to the risk and the actual market operation.
7.7 Sherolex has established an official Margin Risk Fund that will be used to pay the outstanding loans of liquidated margin accounts. Since April 27, 2020, 15% of all interest fees collected from margin borrowing will be allocated to the fund.
7.8 Tiered liquidation is subject to tiered leverage in isolated margin.Users’ position will be liquidated partially to match next tiered leverage if it was under liquidation risk.For more information, please refer to the Tiered Leverage Function article.
8. Sub-account Rules
8.1 Sub-accounts can only enable isolated margin account after opening cross margin account;
8.2 The maximum borrowable amount of the sub-account is 1/10 of the borrowable amount of the master account;
9. Calculation Rules of Margin Account Balance and Trading volume
9.1 Daily average BTC balance of isolated margin account (including isolated margin accounts under sub-accounts) will be calculated in the total daily average BTC balance. The calculation formula is as follows:
Daily average BTC balance of isolated margin account (including isolated margin accounts under sub-accounts) = The sum of the hourly snapshots of the Net BTC balance（Net BTC Balance = BTC Total Balance - Borrowed BTC - Interest Payable in BTC） divided by 24 (hours).
・Snapshots are taken at random times every hour
・Pending orders are included in position statistics
9.2 The trading volume of the isolated margin account (including the margin trading volume of the sub-accounts) will be calculated in the user's total daily trading volume;
10. Supplementary Provisions
10.1 Sherolex provides information release, supervision, and risk control services for isolated margin trading and lending, and does not provide any income guarantee and capital guarantee for users' margin trading on Sherolex. Investors should fully realize that there are relatively large risks, and self-assess the possible losses, and then voluntarily participate on the basis of confirming that the risk is controllable and affordable.
10.2 The terms "exceed" and "below" in this provision do not include equals sign, "not exceed", "not less than", "above" and "reach" contain equals sign.
10.3 These rules are formulated by the Sherolex platform and become effective after the announcement to all platform investors, the same applies to modifications.
10.4 The Sherolex platform is responsible for interpreting these rules.