What Is OKX Insurance Fund? How Does the Platform Compensate After Liquidation?
OKX's insurance fund (risk reserve) serves as the platform's first line of defense against the risk of "bankruptcy" (negative equity after liquidation).In simple terms: after a forced liquidation, if closing the position at market price still leaves a loss that cannot be covered, the insurance fund steps in to fill that shortfall. This ensures that profitable traders can receive their gains normally and the platform's overall risk remains manageable.Only when the insurance fund is exhausted does the auto-deleveraging (ADL) mechanism activate.
1. What Is the Insurance Fund?
The insurance fund, referred to by OKX as the risk reserve, is a dedicated pool of funds used by the platform to absorb losses from forced liquidation orders that result in negative equity. It primarily comes from two sources:
Platform's own capital
"Liquidation surplus" from forced liquidation orders: Any excess funds remaining after a liquidated position is actually executed may be added to the pool.
This fund can be thought of as a "risk buffer." When market volatility is high and your position is forcibly liquidated, if the execution price falls below your corresponding bankruptcy price, causing your account equity to become negative (a bankruptcy event), the insurance fund will cover this negative shortfall.
2. How Does Compensation Work After Liquidation?
When your position triggers a forced liquidation, the process proceeds as follows:
Normal Forced Liquidation: The system closes your position at a price that can be executed on the market. This price is typically set between your bankruptcy price and liquidation price, aiming to minimize losses while ensuring execution.
Bankruptcy Occurs: If market liquidity is extremely poor or volatility is severe, causing the execution price to be below (for long positions) or above (for short positions) your bankruptcy price, your account balance becomes negative.
Insurance Fund Compensation: The negative amount is covered by the insurance fund of the corresponding contract. This is the "compensation" process—the insurance fund makes up the shortfall for the bankrupt user, preventing this loss from being passed on to other profitable traders.
To help you understand that insurance funds for different business lines operate independently, refer to the table below:
| Business Line | Insurance Fund Rules | Example |
|---|---|---|
| Perpetual Contracts (USDT-margined) | USDT risk reserve pools for different underlying contracts areindependentof each other. | The ETHUSDT and XRPUSDT perpetual contract reserve pools are separate. |
| Perpetual Contracts (Coin-margined) | Different underlying contracts have risk reserve pools indifferent coins. | BTCUSD perpetual uses the BTC pool, LTCUSD uses the LTC pool. |
| Futures Contracts | Coin-margined and USDT-margined pools are independent; contracts with the same underlying but different expiry dates are combined. | All BTCUSD futures contracts with any expiry date share the same BTC reserve pool. |
| Margin Trading | Pools are separated by coin, including all trading pairs involving that coin. | All margin trading pairs involving BTC share the BTC reserve pool. |
| Options | Different underlying assets correspond to different coin pools. | BTC options use the BTC pool, ETH options use the ETH pool. |
3. When Does Auto-Deleveraging (ADL) Kick In?
What happens if the market is so extreme that the insurance fund is completely exhausted? At that point, the second line of defense—Auto-Deleveraging (ADL)—is triggered.
OKX has publicly disclosed the trigger conditions for ADL. The most critical one is: when the value of the risk reserve falls below30% of its average over the past 8 hours(or below $50,000), ADL may be triggered. You can think of this as "the insurance fund is running low."
How does ADL work?The platform selects counterparty positions that are most profitable and carry the highest risk (based on criteria such as "leverage and profit"), and forcibly closes them at the bankruptcy price. This offsets the losses from bankrupt users and ensures market stability.
What happens to users affected by ADL?You may receive a notice of position reduction, and the corresponding position will be partially or fully forcibly closed. You can check your ADL risk level in real-time via the "signal light" on the trading page: there are 5 levels, and the more lights that are lit, the higher your risk.
Can the insurance fund balance be viewed?
Yes. OKX's official website periodically publishes real-time insurance fund balance information on relevant pages. For specific query paths, please refer to the latest display on the official website.
If there is remaining margin after liquidation, will it be used to cover losses?
No. The insurance fund only covers the portion of losses resulting from bankruptcy (negative equity). If your position still has remaining margin after forced liquidation, that margin will remain in your account balance as normal.
