I. Basic definition of Futures

1. Futures type: OSL perpetual contracts are crypto derivatives with no expiration date. They are based on underlying assets like BTC or ETH. Investors can go long (buy) or short (sell) to profit from price fluctuations of the underlying assets.

II. Core trading mechanisms

A. Opening and closing positions

1. Open position: The investors need to complete identity verification 

   and transfer funds from Funding Account to Derivatives Account. Select a perpetual contract, choose “long” or “short,” enter the contract quantity (must be an integer multiple) and price (market or limit), then confirm.

   i) Market order: Executes immediately at the best available market price, suitable for fast entry.

   ii) Limit order: Executes at a set price when the market reaches it, suitable for investors with a specific price target.

2. Closeposition: The investors can select “close position,” enter the quantity (partial or full) and price (market or limit), then confirm. PnL is settled in real time to your 

   Derivatives Account after closing.

B. Funding rate mechanism

1. Funding rate calculation: To balance the prices of perpetual contracts and the spot market, OSL Perpetual Contracts charge or pay funding fees at fixed intervals (every 8 hours at 00:00, 08:00, and 16:00 UTC). The formula for calculating the funding fee is: Funding Fee = Notional Value of Held Contracts × Funding Rate. The notional value of held contracts = Position Size × Contract Mark Price. In the event of extreme market conditions, OSL will shorten the funding fee cycle to help the contract price revert to the spot price as soon as possible.

2. Funding rate direction: When the funding rate is positive, long position holders must pay funding fees to short position holders; when the funding rate is negative, short position holders must pay funding fees to long position holders; when the funding rate is 0, no funding fees are collected or paid. The specific funding rate is calculated and published in real time by the OSL platform based on market supply and demand. Investors can check the current and historical funding rates on the Futures trading page.

3. Funding fee settlement: During funding fee settlement, the system will automatically transfer the funding fee based on the investor’s position direction and size. After settlement, investors can view the funding payments in the Derivatives Account transaction history.

C. Leverage mechanism

1. Leverage setting: OSL Perpetual Contracts have different default and maximum leverage for each underlying asset. For example: BTC perpetual contracts: default 10×, maximum 20×; ETH perpetual contracts: default 10×, maximum 20×. The exact leverage limits are displayed on the platform. Investors can adjust leverage before opening a position according to their risk tolerance, as long as it stays within the platform’s allowed range. OSL may re-evaluate and adjust the maximum leverage multiplier based on the risk status of the underlying asset, and relevant adjustments will be communicated to users in advance.

2. Leverage risk warning: Leverage magnifies both profits and losses. Higher leverage increases the sensitivity of your account to price changes. Investors should carefully assess their risk tolerance and choose leverage responsibly to avoid significant losses.

III. Risk control rules

A. Margin mechanism

1. Initial margin: Investors must pay initial margin when opening a position. The initial margin amount = Position value ÷ Leverage multiplier. The initial margin is deducted from the available funds in the Derivatives Account. If the account balance is insufficient, the position cannot be opened.

2. Maintenance margin: Maintenance margin is the minimum margin required to keep a position open. It is usually lower than the initial margin (for the same tier, maintenance margin is typically half of the initial margin). The exact ratio is set by the platform. If account margin falls below the maintenance margin, the system will trigger forced liquidation.

B. Forced liquidation mechanism

1. Trigger condition: Forced liquidation occurs when an investor’s account margin falls below the maintenance margin. The system will automatically liquidate the account’s open positions.

2. Execution process: Once liquidation is triggered, the system will gradually close positions using IOC (Immediate or Cancel) orders until either the account margin returns above the maintenance margin or all positions are closed. If positions cannot be closed at reasonable prices due to low market liquidity, any resulting losses will be covered by the OSL insurance fund. Investors are not responsible for these losses. OSL will publish periodic reports on the use of the insurance fund to ensure transparency.

3. Fees related to forced liquidation

   i) Liquidation fee: Each forced liquidation order incurs a fee. (Note: If the account balance is negative after liquidation, no fee is charged.) Fee rates depend on the underlying asset and position value and are published on the platform in real time. Fees are deducted immediately when the liquidation order executes, and account balances are updated accordingly. Investors can view fee details under “Futures Transactions” (No fee record for negative balance cases).

   ii)Trading fee waiver rule: To reduce costs during liquidation, no standard trading fees are charged—only the forced liquidation fee applies.

4. Use of liquidation fees: All collected liquidation fees are fully added to the insurance fund. These funds help cover losses during liquidations and enhance overall risk protection for investors.

5. Negative account balance after liquidation: If the account balance becomes negative after liquidation, the OSL insurance fund covers the deficit. No trading restrictions, margin calls, or fund recovery actions will be applied to the investor. The specific details are subject to platform rules.

C. Insurance fund

1. Funding: The insurance fund mainly comes from 2 sources: the initial risk reserve injected by the exchange and the forced liquidation fees collected from all non-negative-balance liquidations.

2. Core function: The insurance fund covers losses caused by reasonable price deviations during forced liquidations due to low market liquidity and compensates for negative account balances after liquidation, providing risk protection for investors.

3. Transparency: OSL publishes the insurance fund balance and usage details regularly to ensure transparency and traceability.

D. Auto-deleveraging mechanism (ADL)

1. Trigger condition: The ADL mechanism is activated when extreme market conditions cause many forced liquidation orders to fail to execute normally, and the insurance fund is insufficient to cover the resulting losses. In this case, the system reduces high-leverage profitable positions to release market risk.

2. Priority rule: Positions are selected for reduction in the order of highest leverage first, then highest profit first. This prioritizes closing high-leverage, high-profit positions to minimize overall market impact.

3. Risk warning: The ADL mechanism is only triggered under extreme market conditions and is intended to maintain the overall stability of the trading system. Investors can reduce the probability of being affected by ADL by controlling the leverage multiplier and managing positions reasonably.

E. Price stability mechanism

1. Mark price: To prevent investors from being erroneously liquidated due to extreme market volatility or manipulation, OSL Perpetual Contracts adopt the "mark price" to calculate the account margin ratio and liquidation price. The mark price, as a reasonable price gauge for the contract market, is used to calculate the unrealized profit and loss of contract positions, settle the funding rate, and determine position liquidation. It can be regarded as the most important price indicator in the contract market and also a price that drives the operation of the contract market. Therefore, the mark price should neither be overly sensitive to reflect market changes nor excessively insensitive to them.

IV. Fees

A. Trading fees

1. Trading fee calculation: Trading fees for OSL Perpetual Contracts are charged as a fixed percentage of the transaction value. Fees are split into opening fees and closing fees. The exact rate depends on the investor’s membership tier (e.g., Regular, VIP) and the trading type (Maker or Taker). Rates are displayed on the platform.

2. Trading fee collection method: Fees are automatically deducted from your position margin when the trade is executed.

B. Other fees

1. Withdrawal fee: If you withdraw funds from your Derivatives Account to an external wallet after transferring funds from the Funding Account, a withdrawal fee applies. The fee depends on the currency and withdrawal amount and is displayed on the platform’s withdrawal page.
2. Fund transfer fee: Transferring funds between the Derivatives Account and the Spot Account is free of charge.

V. Account structure overview

OSL employs a 3-account system designed with independent functions and segregated funds. This structure clearly separates trading scenarios and risk boundaries to fully protect users' assets.

1. Funding Account: The core account for managing deposits, withdrawals, and internal fund transfers. It serves as the main funding channel for both Spot and Derivatives Accounts.

2. Spot Account: Dedicated to crypto Spot trading. It records only Spot trading activity and asset balances, remaining fully isolated from Futures trading.

3. Derivatives Account: Used exclusively for Perpetual futures trading. All actions related to initial margin deposits, PnL settlement, and funding payments are handled within this account.

4. Key risk isolation rule: All trading risks related to Futures trading (including liquidation and negative balance scenarios) are contained within the Derivatives Account. Assets in the Spot and Funding Accounts are fully protected and will not be affected by Futures liquidations.

VI.Handling of special circumstances

A. System issues

If investors are unable to trade normally or incur losses due to OSL Exchange system errors, network problems, or other technical issues, the exchange will issue a timely announcement explaining the situation. Depending on the scope and severity of the issue, measures such as compensation or extended trading hours may be implemented. The specific compensation plan is subject to the announcement.

B. Asset-related events

1. Forks: If the underlying asset of the contract undergoes a blockchain fork, the OSL Exchange will decide whether to adjust the perpetual contract (such as splitting the contract, replacing the underlying asset, etc.) based on the market situation after the fork, and issue an announcement in advance to notify investors. Investors must handle their positions in a timely manner in accordance with the requirements of the announcement.

2. Delisting: If the underlying asset of the contract is delisted due to regulatory policies, changes in market demand, or other reasons, the OSL Exchange will issue an announcement in advance (usually at least 7 days) to notify investors to close their positions within the specified time. Positions not closed within the time limit will be forced to close by the system, and the funds will be transferred to the investor’s Derivatives Account after closing.

VII. Supplementary rules

1. These Rules shall take effect from the date of issuance. The OSL Exchange reserves the right to revise these rules based on market conditions, regulatory requirements, etc. The revised Rules will be notified to investors through platform announcements, and the revised content shall take effect from the date of the announcement.

2. Before participating in OSL Perpetual Contract trading, investors shall carefully read and understand these rules and other relevant rules of the platform, fully understand the trading risks, and voluntarily bear all consequences arising from the trading.

3. In case of disputes between investors and the OSL Exchange regarding perpetual contract trading, the parties shall first resolve the dispute through friendly negotiation; if negotiation fails, the dispute may be submitted to the people’s court with jurisdiction in the place where the OSL Exchange is located for litigation.