FuturesHUB / Insurance fund
Perpetual futures
Insurance fund
The insurance fund is the pool that pays the difference when a liquidation cannot close at a price that covers the bankrupt account. It is what stands between a bad fill and a socialized loss.
Why the pool exists
A perpetual is zero-sum between longs and shorts before fees. If a loser is liquidated and the book gaps so far that their margin does not cover the winner's gain, someone still has to pay the winner. The insurance fund is that someone, up to the balance it holds.
The pool is usually filled by liquidation fees and by residuals that were better than bankruptcy. It is not your isolated margin, and it is not a promise that your winner will be paid in full if the fund is empty. Empty is when auto-deleveraging starts.
Reading the balance
Venues publish the fund balance by contract or by margin asset. A large balance relative to recent liquidations is spare capacity. A balance falling toward zero during a fast market is a warning that the next bankrupt positions may be passed to profitable traders through auto-deleveraging.
LiquidityFlow does not mirror those balances. When you care about the number, read it on the venue and note the time. A screenshot from a calm week does not describe the fund in the minute you need it.
What it does not cover
The fund does not refund your trading fees, your funding, or a stop that slipped. It covers the deficit after a bankrupt liquidation. If your own position was the one liquidated, the fund's job is to make the other side whole, not to restore your margin.
Different margin assets have different pools. A USDT-margined fund does not automatically back a coin-margined contract. Check the pool that matches the contract you hold.
On the ticket
- Open the venue's insurance fund page for the contract's margin asset and note the balance and the time.
- Read the liquidation-fee rule so you know what fills the pool.
- If the balance is falling quickly, assume auto-deleveraging is closer and reduce size you cannot afford to have closed for you.
- Keep the fund in the same mental list as liquidation and ADL. They are one sequence, not three unrelated features.
Questions
Does the insurance fund stop me from being liquidated?
No. It pays deficits after a liquidation has already bankrupted an account. Your maintenance check still happens.
Is the fund the same on every contract?
Pools are usually split by margin asset and sometimes by contract. Read the pool attached to the contract you hold.