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What Is Margin Insurance Fund

What Is Margin Insurance Fund

2021-06-18 07:06
The Margin Insurance Fund is designed to make up for losses incurred when the user’s Cross Margin or Isolated Margin account equity (asset minus liability) is less than 0, or when the user is unable to repay debts on Crypto Loan orders. In this case, the platform will inject the Liquidation Clearance Fees and part of the income from Margin, as well as Crypto Loans, into the Margin Insurance Fund.
Margin Insurance Fund rules:
  1. If your margin account goes bankrupt, i.e., there are not enough funds in the account to repay the debt after being force liquidated, resulting in negative equity (asset-liability), the system will use the Margin Insurance Fund to repay your debt.
  2. Similarly, if your Crypto Loan order goes bankrupt and the collateral is insufficient to repay the debt, the system will repay using the Margin Insurance Fund.
You can check the balance of your Margin Insurance Fund by clicking [Wallet] - [Margin] - [More Data] - [Insurance Fund], or you can also view it directly from [Margin Insurance Fund].

What are Liquidation Clearance Fees?

When your Margin account or Crypto Loan order is being force liquidated, the Margin Insurance Fund will charge a certain percentage in clearance fees. These fees can be viewed in the Margin account Clearance Fee History. However, you are recommended to manage your risks carefully to avoid forced liquidations. The user's liquidation price will not change as a result.
Liquidation fee
Cross Margin
Cross Margin liquidated assets * 2%
Isolated Margin
Isolated Margin liquidated assets * clearance fee rate corresponding to Tiered Leverage
Crypto Loans
Crypto Loan liquidated assets * 2%
Note: The Clearance Fee rate corresponding to the Tiered Leverage = (the liquidation risk ratio of your tiered leverage during liquidation - 1) * 8% (the max. amount that can be charged without exceeding your remaining asset balance after liquidation).
Example: If a user is being liquidated and reduced positions in ADA/ETH Tier 3, then the Clearance Fee rate = (1.165 - 1) * 8% = 1.32%.