[//]:content-type-MARKDOWN-DONOT-DELETE ## What Is the Insurance Fund The insurance fund is a risk buffer mechanism set up by Gate for derivatives trading. Its purpose is to mitigate the impact of liquidation on the market and counterparties during extreme market conditions, and to reduce the probability of triggering auto-deleveraging (ADL). When the secondary market cannot fully absorb liquidation orders, the insurance fund will step in to take over, ensuring the orderly completion of the liquidation process and preventing accounts from incurring negative balances. Please note that the insurance fund is not used to cover individual trading losses and cannot replace users' own risk management measures. ## How the Insurance Fund Works When liquidation is triggered, the liquidation system takes over the relevant position and places an order in the secondary market at the bankruptcy price. If the liquidity in the secondary market is insufficient to fully fill the order, the insurance fund will take over the unfilled portion and settle it at the bankruptcy price. The insurance fund continues to participate throughout the entire liquidation process until liquidation is completed. Details of the liquidation mechanism can be found on the Liquidation Process page. If extreme market volatility causes the insurance fund to be unable to fully take over pending liquidation orders, the ADL mechanism will be triggered. At that point, the system will deleverage counterparties' positions in order, until liquidation is completed. Details of the ADL mechanism can be found on the Auto-Deleveraging (ADL) page. **Bankruptcy Price Calculation** Cross Margin Mode Long Position: Bankruptcy Price = Mark Price at Liquidation × [1 – (Maintenance Margin Ratio + Taker Fee Rate) × Margin Ratio] ÷ (1 – Taker Fee Rate) Short Position: Bankruptcy Price = Mark Price at Liquidation × [1 + (Maintenance Margin Ratio+ Taker Fee Rate) × Margin Ratio] ÷ (1 + Taker Fee Rate) Isolated Margin Mode Long Position: Bankruptcy Price = (Average Entry Price – Margin ÷ Contract Multiplier ÷ Position Size) ÷ (1 – Taker Fee Rate) Short Position: Bankruptcy Price = (Average Entry Price + Margin ÷ Contract Multiplier ÷ Position Size) ÷ (1 + Taker Fee Rate) For more details on bankruptcy price calculation, please refer to the Estimated Liquidation Price and Bankruptcy Price Calculations page. ## Insurance Fund Balance and History Users can view the current balance and historical changes of the insurance fund on the Insurance Fund Balance page. You can filter by contract type and time range. Balances are usually updated daily at 00:00 (UTC), subject to what is displayed on the page. ** Inflow and Outflow of Funds in the Insurance Fund** **Inflow** • Remaining maintenance margin after liquidation execution • Manual injections by Gate into the insurance fund • Profits from handling liquidation orders (if any) **Outflow** • Losses from handling liquidation orders (if any) ## Example Suppose a user holds only a long position of BTCUSDT perpetual contract in cross margin mode. At the time of liquidation, the mark price is 101,010.9 USDT, the maintenance margin ratio is 1%, the margin ratio is 100%, the taker fee rate is 0.075%, and the contract multiplier is 0.0001. Since liquidation is triggered, 10 contracts need to be closed. The bankruptcy price of the user's long position in cross margin mode is: 10101.09 × (1 – (1% + 0.075%) × 100%) ÷ (1 – 0.075%) = 100,000 USDT At this time, the secondary market bid-side depth is as follows: | Level | Bid Price | Amount (Contracts) | | :--- | :--- | :--- | | Bid 1 | 101,000 | 2 | | Bid 2 | 100,000 | 5 | | Bid 3 | 99,000 | 10 | | ... |
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| After the user's position is liquidated, the liquidation system will take over and place an order to sell 10 contracts at the bankruptcy price of 100,000 USDT. At this moment, only the Buy 1 and Buy 2 quotes are equal to or higher than the bankruptcy price, resulting in the following executions: • 2 contracts filled at 101,000 USDT • 5 contracts filled at 100,000 USDT • The remaining 3 contracts cannot be filled because the best bid (99,000 USDT) is below the bankruptcy price At this point, the insurance fund steps in and takes over the remaining 3 unfilled contracts at the bankruptcy price of 100,000 USDT, settling them accordingly. The fund will then manage the subsequent risk, with any profit or loss absorbed by the insurance fund. In this liquidation process, the actual average fill price of all orders is: (2 × 101,000 + 8 × 100,000) ÷ 10 = 100,200 USDT. Since the average fill price is higher than the bankruptcy price, a surplus is generated: (100,200 – 100,000) × 0.0001 × 10 = 0.2 USDT. This surplus will be credited to the insurance fund for future risk management and has no relation to the user. Please note that the settlement price of all liquidated positions is uniformly calculated at the bankruptcy price of 100,000 USDT. This ensures that regardless of actual market fills, users will not incur any negative balance risk. The maximum loss is capped at the bankruptcy price, while any surplus from liquidation will be credited to the insurance fund to maintain market stability, without affecting the user's final settlement result. ## Risk Disclaimer The insurance fund does not constitute any form of guarantee, nor does it ensure that users are free from losses. In abnormal or extreme market conditions, abnormal price fluctuations, liquidity disruptions, or the triggering of Auto-Deleveraging (ADL) may still occur.