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Insurance Mechanism

Updated
Insurance Fund Definition
The Insurance Fund mechanism is a risk reserve established by the platform, primarily used for:
  • Compensating over-loss positions during extreme market conditions
  • Reducing the probability of triggering Auto-Deleveraging (ADL)
Fund Sources
  1. Liquidation Surplus:
    • When the liquidation system takes over positions
    • If positions are closed at better-than-bankruptcy prices
    • All resulting surplus is injected into the Insurance Fund
  2. Operational Process:
    • The liquidation system takes over positions and remaining margin at bankruptcy price
    • If actual closing price is better than bankruptcy price
    • The price difference is automatically allocated to the Insurance Fund
Fund Utilization Mechanism
  1. Compensation Principle:
    • After the liquidation system takes over positions
    • Priority use of Insurance Fund for partial compensation
    • Calculation of optimized closing prices based on this
  2. Order Execution:
    • Submission of optimized closing orders to the market
    • ADL triggering if orders fail to execute
    • Fund compensation improves order fulfillment rate
  3. Currency Management:
    • Perpetual contracts sharing the same margin currency
    • Share a unified Insurance Fund pool