FAQ

Interest rates are modeled as a term structure, constructed by interpolating across proxy risk-free rates:

• 1D: SOFR
• 3M, 6M, 1Y: T-Bill / Treasury rates

Forward prices are derived from spot using continuous discounting:

$\small\text{Forward Price}=\text{Spot Price}\times\exp(~\text{Interpolated Interest Rate}\times \text{Time to Expiry}~)$

Paradex supports both Cross Margin and Portfolio Margin.

Portfolio Margin significantly reduces margin requirements for hedged portfolios. As an example, hedging a 7-day ATM short call using a Paradex perpetual results in more than 50% margin reduction.

See the Portfolio Margin page for more details on the methodology.

• Private key: Every Paradex account has a unique private key used to sign orders and transfers.
• Self-custody: Paradex is non-custodial. All actions must be authorized via user signatures. Without a valid signature, no trade can be executed.
• Scoped permissions: Paradex supports Subkeys. A Subkey is a separate private key with restricted permissions. It can place and cancel orders but cannot withdraw funds.
• Signing orders: When placing an order via the API, a signature must be provided in the header. This signature is generated by signing the order hash with the Subkey’s private key.
• JWT tokens: For read-only requests (such as fetching balances), signing is not required per request. Instead, you authenticate once by signing a message to obtain a JWT token, which is then used for the session.
• Web users: Users sign a message with their Ethereum wallet. This signature is used to deterministically derive and unlock their Starknet trading key.
• API users: paradex-py and paradex-js handle order hashing and signing with the user Subkey.

Liquidations are performed exclusively by the insurance fund, which is implemented as a sub-strategy of GigaVault.

When an account breaches maintenance margin requirements, the insurance fund acts as the liquidator by reducing the account’s exposure through trades against it. The system prioritizes partial liquidation, minimizing the portion of positions closed and proportionally reducing positions to preserve hedges where possible, while charging a proportional liquidation penalty.

The liquidator account is funded by a portion of GigaVault deposits and uses an unwind algorithm designed to hedge and exit positions efficiently while minimizing market impact. The strategy has historically been profitable.

Liquidations are not currently open to market makers. However, a Position Assignment System (PAS) is in development, which will allow the insurance fund to assign positions to designated market makers under profitable terms in situations where it accumulates large exposure or when market liquidity is low.

RPI is a special order type designed to give retail traders better execution prices while limiting exposure of these orders to toxic flow. It works by making orders visible to users in the UI but invisible to API-based traders, effectively creating a retail-only liquidity layer.

Key rules:

• Retail-only interaction: RPI orders only execute against retail taker orders. Retail taker orders are subject to a 300 ms speed bump and lower rate limits, making them a protected order type for market makers.
• Maker-only (post-only): RPI orders always add liquidity and never take existing orders.
• Lowest priority at the same price: Even at the same price level, RPI orders are filled after all regular orders.

See the Retail Price Improvement page for more details.