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There is one insurance fund shared across the protocol. Each market has access to a fixed-percentage budget of the total insurance fund balance per close-out event. This means the amount available to a given market depends on the current fund balance and the market’s configured share.

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When it is used

The insurance fund is part of the protocol’s liquidation backstop. It is used when a liquidated position’s margin cannot safely cover the outcome at the time the protocol’s close order fills:
  • Seized at fill: the position’s remaining margin is forfeited and sent to the insurance fund.
  • Underwater at fill: the position’s margin is negative, so the insurance fund pays the deficit to keep the system solvent.
These cases correspond to the “Seized” and “Underwater” position health statuses described on the Liquidation page. If the insurance fund budget for a market is exceeded during a close-out, ADL (auto-deleveraging) triggers as a last resort.

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How it is funded

The insurance fund receives capital from two sources:
  1. A share of trading fees: After minority-side rebates, a portion of the remaining fees from each matching cycle is routed to the insurance fund (see Fees and Rebates).
  2. Seized position margin: When a liquidated position is seized at fill, its remaining positive margin is forfeited to the fund.