The liquidation insurance fund is meant to cover losses incurred by traders who go bankrupt. Fees paid by non-bankrupt traders are injected into the liquidation insurance fund and used for this purpose.
The primary goal of the insurance fund is to reduce the occurrence of counterparty liquidation.
- If you go bankrupt, i.e. your position is closed by force, and there are no funds left in your account or the position cannot be closed via forced liquidation, ApolloX will take control of the remaining positions on your account.
- In this case, ApolloX will use the insurance fund to reverse the liquidation. When the insurance fund does not have enough funding to take over the remaining positions of someone who is undergoing liquidation, counterparty liquidation will occur.
Liquidation Insurance Fund rules:
The fund will assess the maximum net notional value of the position, which is not allowed to exceed a predefined limit; by default, this is 100% of the size of the insurance fund. Any positions that would exceed the maximum notional value are subjected to automatic counterparty liquidation. At this time, the insurance fund will begin to offload positions using a preset algorithm, and any liquidation events that would normally require intervention from the insurance fund are subjected to counterparty liquidation.