What is a Futures Risk Fund?

A Futures Risk Fund is a safety mechanism established by the platform to protect traders from adverse losses caused by bankrupt positions.

CoinW has multiple futures risk funds in place. The assets in each fund are designated to cover the trading losses resulting from bankrupt positions in their respective futures markets.

 

How Does the Futures Risk Fund Work?

If the margin provided by a user to maintain a position falls below the required maintenance margin, forced liquidation will be triggered.

After a position is forcibly liquidated, if:

• There is a remaining balance in the cross-margin account, or
• There is remaining margin in the isolated position,

...then the position is considered bankrupt, and the remaining assets or margin will be transferred into the risk fund. If there is no remaining balance, the risk fund will be used to cover the loss instead.

 

How is the Minimum Size of the Risk Fund Determined?

The minimum size required of each futures risk fund is regularly adjusted to ensure it is sufficient to cover potential losses from bankrupt positions.

At 16:00 (UTC+8) daily, the platform will reconcile and transfer the losses or surpluses from all forced liquidation and ADL (auto-deleveraging) orders that occurred from the previous day at 16:00 (UTC+8) to the current time. These are recorded as liquidation losses or risk fund injections.

CoinW will review and adjust the required minimum fund size for each futures risk fund quarterly or whenever deemed necessary.

 

How is the Futures Risk Fund Funded and Maintained?

When a futures risk fund takes over a bankrupt position, the remaining margin from that position is transferred into the futures risk fund.

Each futures risk fund is continuously monitored. If any fund falls below its required minimum, CoinW will inject additional assets into the fund. If needed, assets may be rebalanced between different funds to ensure each fund meets its required minimum level.

If a fund exceeds its minimum required size after periodic reviews, CoinW reserves the right to use the excess amount at its discretion for other appropriate purposes.

 

What Happens If the Futures Risk Fund Is Insufficient to Cover Losses?

If the futures risk fund cannot cover the losses from a bankrupt position, CoinW will be unable to take over the position. In this case, the matching engine will trigger auto-deleveraging (ADL), forcibly closing positions held by other users to offset the loss.

This process involves:

• Forcibly liquidating the bankrupt position
• Automatically closing positions of other users (non-bankrupt), based on leverage level and profitability

For more details, please refer to the "ADL Auto-Deleveraging Mechanism".