What Is the insurance fund
The insurance fund is a risk-buffering mechanism established by Gate for derivatives trading. Its purpose is to reduce the market impact of liquidation during extreme market conditions, protect counterparties, and lower the likelihood of triggering Auto-Deleveraging (ADL). When the secondary market cannot fully absorb liquidation orders, the insurance fund steps in to take over the unfilled portion, ensuring the liquidation process is completed in an orderly manner and preventing negative account balances. Please note that the insurance fund does not 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 position and submits orders to the secondary market at the bankruptcy price. If market liquidity is insufficient and the order cannot be fully filled, the insurance fund will take over the remaining unfilled amount and settle it at the bankruptcy price. The fund participates throughout the liquidation process until liquidation is completed. Details of the liquidation can be found on the Liquidation Mechanism page. If extreme volatility prevents the insurance fund from fully absorbing pending liquidation orders, the ADL mechanism will be triggered. The system will then deleverage counterparties' positions in sequence 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 × [1 – (Maintenance Margin Ratio + Taker Fee Rate) × Margin Ratio] / (1 – Taker Fee Rate) Short Position: Bankruptcy Price = Mark Price × [1 + (Maintenance Margin Ratio + Taker Fee Rate) × Margin Ratio] / (1 + Taker Fee Rate) Isolated margin mode Long Position: Bankruptcy Price = (Average Entry Price – Initial Margin / Contract Multiplier / Position Size) / (1 – Taker Fee Rate) Short Position: Bankruptcy Price = (Average Entry Price + Initial Margin / Contract Multiplier / Position Size) / (1 + Taker Fee Rate) For detailed explanations of bankruptcy price calculations, please refer to Estimated Liquidation Price and Bankruptcy Price Calculations.
Insurance fund balance and history
Users can view the current balance and historical changes of the insurance fund on the Insurance Fund Balance page, with filters available by contract type and time range. Balances are typically updated daily at 00:00 (UTC), subject to the page display.
Inflow and outflow of the insurance fund
Inflow • Remaining maintenance margin after liquidation execution • Manual injections by Gate • Profits generated from handling liquidation orders (if any)
Outflow • Losses incurred 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 moment 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. Liquidation requires closing 10 contracts. The bankruptcy price of the long position in cross margin mode is: 101010.9 × (1 – (1% + 0.075%) × 100%) / (1 – 0.075%) = 100,000 USDT At this time, the bid-side order book depth is:
| Level | Bid Price | Amount (Contracts) |
|---|---|---|
| Bid 1 | 101,000 | 2 |
| Bid 2 | 100,000 | 5 |
| Bid 3 | 99,000 | 10 |
| ... | ... | ... |
After liquidation is triggered, the system takes over the position and places a sell order for 10 contracts at the bankruptcy price of 100,000 USDT. Only Bid 1 and Bid 2 are equal to or above the bankruptcy price, resulting in: • 2 contracts filled at 101,000 USDT • 5 contracts filled at 100,000 USDT • 3 contracts unfilled 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 contracts at 100,000 USDT, assuming subsequent risk. Any profit or loss will be borne by the insurance fund. The actual average fill price of all executions 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 created: (100,200 – 100,000) × 0.0001 × 10 = 0.2 USDT This surplus is credited to the insurance fund for future risk management and has no relation to the user. Please note that all liquidated positions are settled at the bankruptcy price of 100,000 USDT. This ensures that regardless of actual fill prices, users will not incur negative balances. The maximum loss is capped at the bankruptcy price, and any liquidation surplus is allocated to the insurance fund to maintain market stability without affecting users' settlement results.
Risk disclaimer
The insurance fund does not constitute any form of guarantee and does not ensure that users are protected from losses. Under abnormal or extreme market conditions, unusual price fluctuations, liquidity disruptions, or the triggering of Auto-Deleveraging (ADL) may still occur.
