What is concentration rate?
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Concentration Rate is the penalty rate for having proportionally too much of your funds concentrated in a single asset, meaning that a large proportion of your cash is invested in a single instrument. This rate is applied to encourage diversification and reduce risk from exposure to a single asset. Concentration Rates apply to most Forex, Cryptocurrency CFDs, and high-risk Stock and ETF instruments.

Concentration Margin is the margin shown in your account, if, due to high exposure in a single asset, Concentration Rate is applied to an investment.

There are two ways the Concentration Margin is calculated, depending on the information shown in “Instrument Info”:

  1. Concentration Margin is applied if in Instrument Infoyou see “Required Margin” and “Concentration Rate.” This means that the Required Margin * Concentration Rate* Quantity is greater than the Net Asset Value; otherwise standard Leverage Rate is applied.

Example - BTC.USD

BTC.USD (Bitcoin / US Dollar) has:

  • Required Margin of $7975

  • Concentration Rate of 167%

  • The current market price is $26,613

All of this information can be found in “Instrument Info.” Now, let's assume:

  • your NAV (Account Value) is $10,000

  • You want to buy 0.5 of BTC at market price:

$7975 (Required Margin) * 167% (Concentration Rate) * 0.5 (Quantity) = $6659 < Account Value ($10,000), so Concentration Margin is not applicable. Standard Required Margin of $7975 per 1 BTC is applied, so $7975 (Required Margin) *0.5 (Qty of BTC) = $3987 is blocked as margin.

If you wish to purchase 1 BTC (worth $26,613 at market price with the same NAV of $10,000:

$7975 (Required Margin) * 167% (Concentration Rate) * 1 (Quantity of Investment in BTC) = $13,318 > Account Value ($10,000), so Concentration Margin is applied, and $13,318 is blocked as margin. This will cause a margin call on the account, as Margin Utilisation will be $13,318 (Concentration Margin) / $10,000 (NAV) = 133%

  1. Concentration Margin is applied if in the Instrument Infoyou see “Leverage Rate” and “Concentration Rate.” Concentration Rate * Value is greater than Net Asset Value; otherwise standard Leverage Rate is applied.

Example - Forex

JPY/USD.E.FX (Japanese Yen/US Dollar) has:

  • Leverage Rate of 2%

  • Concentration Rate of 5%

All of this information can be found in “Instrument Info.” Let's assume:

  • your NAV (Account Value) is $10,000

  • You want to open a long position in JPY/USD valued at $100,000:

5% (Concentration Rate) * $100,000 (Value) = $5000 < Account Value ($10,000), so Concentration Margin is not applicable, meaning that you will be charged a standard leverage rate of 2%, so 2%*$100,000 = $2000 will be blocked as margin.

If you wish to open a long position worth $300,000:

5% (Concentration Rate) * $300,000 (Value) = $15,000 > Account Value ($10,000),so Concentration Margin is applied and $15,000 will be blocked as margin. This would cause the account to go into margin call, as margin utilization would be 150% ($15,000 Concentration Margin / $10,000 Account Value).

Example 2 - AVEM.ARCA, ETF (with pictures)

  • AVEM.ARCA (Avantis Emerging Markets Equity ETF) has a market price of $54.51,

  • Leverage Rate of 20%

  • Concentration Rate of 100%

All of this information can be found in “Instrument Info.” Let's assume:

  • your NAV (Account Value) is $10,000

  • You want to open a long position of 100 AVEM.ARCA (worth 5,451 USD)

100% (Concentration Rate) * $5451 (Value) = $5451 < Account Value ($10,000), so Concentration Margin is not applicable, meaning that you will be charged a standard leverage rate of 20%, so 20%*$5451 = $1090.30 will be blocked as margin.

However, if you wish to open a long position of 200 AVEM.ARCA (worth $10,903):

100% (Concentration Rate) * $10,903 (Value) = $10,903 > Account Value ($10,000),so Concentration Margin is applied and $10,903 will be blocked as margin. This would cause the account to go into a margin call, as margin utilization would be approximately 115%

The same logic, as described above, applies to short positions.

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