What is the Futures insurance fund?

The Futures insurance fund is a safety mechanism introduced by OSL to mitigate the impact of liquidation. It is designed to protect traders from adverse losses resulting from bankrupt positions and help to ensure that the profits of in-the-money positions are paid out to profiting traders in full.

OSL maintains multiple Futures insurance funds, with assets potentially held in one or more wallets. The coverage scope and allocation across different contract categories are determined and periodically adjusted by OSL. Assets in each fund can be used to cover losses arising from the contract categories it supports.

The insurance fund is solely intended to reduce risks associated with counterparty liquidations in futures trading. It does not guarantee full protection against losses and should not be considered as a substitute for your own risk management.

How does the Futures insurance fund work?

A trader’s position will be liquidated if the collateral made available by the trader to maintain the position is less than the margin required to maintain the position. A position will be considered bankrupt if the balance of the assets made available by the trader for that position is less than 0 following liquidation, or if the position cannot be liquidated (a “Bankrupt Position”).

The Futures insurance fund will attempt to take over these bankrupt positions. Any losses caused by bankrupt positions are absorbed by the corresponding insurance fund, while any gains from bankrupt positions are added to the fund.

If unrealized losses from bankrupt positions taken over by the liquidation engine exceed the available balance of the Futures Insurance Fund for that contract category, the liquidation engine will be unable to fully process those contracts, and the ADL mechanism will be triggered.

Important: The Futures insurance fund does not cover individual traders’ personal losses. It only covers the difference between the bankruptcy price and the execution price of liquidation orders. Traders cannot claim compensation from the fund.

How is the Futures insurance fund funded and maintained?

When a position is liquidated, unless it becomes a bankrupt position after liquidation, a portion of the assets used to maintain the position is collected as a forced liquidation fee by OSL. OSL may allocate all or part of these fees to the Futures insurance fund to support its ongoing operation.

What happens if the Futures insurance fund is insufficient to cover bankrupt positions?

If bankrupt positions reach the maximum coverage limit of the Futures Insurance Fund, the matching engine will activate the ADL mechanism. ADL will forcibly reduce positions of bankrupt accounts and partially reduce positions of non-bankrupt counterparties. During the process, OSL prioritizes liquidating bankrupt positions first and selects counterparty positions for reduction based on leverage and profit to cover the losses caused by bankrupt positions.

If you experience any issues or require further assistance, please contact the OSL Global Support Team through the app, platform, or by emailing [email protected]