Aurox Trade is Aurox’s centralized order execution and trading platform with margin trading capacity of up to 4x the value of underlying assets.
Our platform is unique in that it sources liquidity for supported margin assets by borrowing directly from our DeFi lending platform, Aurox Lend. Whereas the order book liquidity on Aurox Trade is generated from our integration into multiple centralized exchange partners.
Deep Combined Liquidity
Aurox Trade is not an exchange. It is an aggregated match making engine which allows users to log into the Aurox Terminal and place orders on over 10 exchanges with a single account. In essence, Aurox Trade integrates directly into your favorite exchanges, such as Binance and Bitfinex, and executes trades on your behalf through our proprietary trading engine. Traders will be able to receive the lowest fees, lowest slippage and the deepest liquidity.
Aurox Trade takes it one step further, allowing traders to access margin based ordering through the Aurox Lend DeFi protocol.
How it Works
In a typical, centralized exchange, margin lending is handled directly from the exchange’s cryptocurrency accounts and results in loans of margined assets directly between the account holder and the exchange.
To provide these margin lending capabilities, cryptocurrency exchanges need to maintain substantial reserves of cryptocurrency holdings in order to loan them out. These multi-currency reserves subject exchanges to market volatility and risk, which can be quite significant, especially for non-stablecoin currencies.
For the exchange’s risk, it can charge any fee it deems reasonable, and due to the lack of options in the cryptocurrency markets, these rates are often usurious, that is, abnormally high in comparison to rates offered by comparable non-cryptocurrency margin lenders.
However, with the advent of decentralized lending, this risk can be mitigated by Aurox Trade, by eliminating the need to maintain a centralized reserve of exchange-owned assets. By borrowing directly from token holders, who are the ultimate custodians and risk-bearers, our cryptocurrency exchange implements a novel lending approach allowing us to competitively and fairly price margin rates based on actual supply and demand.
Based on our cursory analysis, and review of historic lending rates (admittedly decentralized lending is still in its infancy stages and rate information ages to the months not years), we believe margin lending rates through DeFi lending will be more competitive than fixed rates offered by many of the centralized margin lenders.
The Case for Exchange Centralization
One may ask — since Aurox went to great lengths to merge DeFi lending with a centralized form of order execution, why not create a decentralized exchange at the same time?
We believe the combination of designing and building a DeFi lending protocol and then merging it with a centralized order execution model provides the best product experience for both lenders and margin borrowers.
In order to provide the combination of high (4x) leverage with the competitive market rates of DeFi lending, the platform needs the ability to secure funds for borrowers in a manner that is currently not possible with current permissionless collateralized lending and borrowing such as those offered by Compound and Aave.
In permissionless protocols the platform does not collect any information on borrowers or lenders. In addition to this, being decentralized, there are typically no credit or collection departments or other staff to aide in the collection of non-performing loans. To remedy this, decentralized and permissionless lending platforms require significant upfront capital at a high collateralization ratio, typically $2 for every $1 borrowed. This 1:2 ratio of borrowed funds to pledged funds makes high leverage margin lending an impossibility.
Aurox solves this by centralization the trading aspect, allowing us to the ability to perform several important actions:
- Programmatically and automatically unwinding margin positions that are at risk of default
- Enabling platform users to leverage their wallet holdings as collateral without instantiating expensive smart contracts
- Maintaining a lending reserve to enable fast execution
This allows us to minimize custodial risk, and benefit from downside protection provided by centralization.
Beyond this, centralization affords us the ability to provide features that aren’t available with DeFi exchanges by design:
- High performance and lowest latency
- Best price execution
- Deeper order books
- Order book sharing and repeating
- No swap pool slippage or price impact issues
- Low cost — no smart contract execution fees
Aurox Margin Lending
Aurox Trade offers up to 4X leverage on majority of cryptocurrencies such as BTC and ETH. Typically, on a centralized exchange when a margin balance is opened, it is funded in fiat such as USD. That USD can then be used to purchase currencies available on that platform. Traders can establish margin loans in specific markets, and their leverage, the maximum amount they can borrow, is dependent on the liquidity of that market.
On Aurox, margin loans are directly funded in the cryptocurrency they wish to borrow. For example, if a trader is shorting ETH, they would sell 4X the value of ETH as their posted collateral. Aurox would fulfill this trade by pulling the respective amount of ETH from its reserve pool, which itself is funded by the DeFi lending platform.
Prior to obtaining a margin loan, a trader must post collateral in a supported cryptocurrency. The margin lending rates are determined based on the cryptocurrency posted and the asset borrowed. For example, in highly liquid markets such as USDC and ETH, a trader could post the equivalent of $100 in USDC as collateral and obtain the equivalent of $400 in ETH on margin. In less liquid markets a 1X margin loan might be given.
A fee is automatically calculated by the platform every four (4) hours the margin position is held and is deducted automatically from a trader’s posted collateral. The margin lending rate varies according to the cryptocurrency borrowed.
Margin Call and Liquidation
Should the value of the collateral in relation to the borrowed assets diverge by 15% or more, a margin call will be issued requiring the trader to increase the amount of collateral posted. If the value diverges by 25% or more, a Liquidation Event occurs resulting in the collateral being sold and the borrowed position closed.
Function of the Reserve Pool
The function of the reserve pool is to make sure the requisite assets are available immediately without having to wait for smart contract execution. The reserve pool also reduces costs by reducing the frequency of smart contract execution by aggregating large loans from the DeFi platform instead of upon each trader’s order. Specifically, the reserve pool shall contain a target of approximately 5% of the total assets locked on the Aurox Lend.
Aurox Lend also provides an option for decentralized lenders to provide an email address or enable notifications within their browser. These two avenues allow our lending platform to signal critical information such as the requirement to increase collateral or reduce the loan amount in order to avoid being in default and being forced to liquidate. Aurox only temporarily stores this information while a contract is open on its platform. Once a contract is closed and no active balance is in place, the information is purged from the system. In this way Aurox does not record any private information on its users. For those borrowing using Aurox Trade for margin purposes, the information already provided as a part of the account opening process will be utilized and no further or special action is needed.
Aurox Trade Margin and Trading Fees
Aurox Trade feature highly competitive rates that can be further discounted by URUS-based incentives.
Traders who borrow on margin pay the stated market margin rate on the platform. There are no additional fees. Aurox collects a 10% fee paid from the lenders share, based on the margin rate paid by borrowers.
Aurox Lend Token Incentives
Aurox’s platform is powered by URUS, its ERC-20 token. Exchange users who hold URUS will be eligible for the following benefits:
- 50% Discount on Trading Fees
- 50% Discount on Margin Fees
- Staking interest on assets held on Aurox Trade
- Reward Pool for Trading Competitions and Referrals
For a more comprehensive explanation, please download our whitepaper or contract a member of the Aurox team.
Aurox is no stranger to cryptocurrency trading. The company was founded in 2018 by cryptocurrency entrepreneurs and after a year of development, launched a powerful and intuitive trading terminal with the capacity to integrate with over 60 cryptocurrency exchanges while supporting over 1,100 trading pairs. The terminal features proprietary trade indicators (Aurox Indicator, Aurox Lines, Fear & Greed Indicator), highly configurable workspaces, trade alerts, news feed and much more.