Insurance Fund

The insurance fund is a reserve mechanism designed to protect BBX markets from losses that exceed an individual trader's margin in a liquidation event.

Purpose of the Insurance Fund

• Absorbs liquidation shortfalls.

• Protects profitable traders from being liable for other traders' losses.

• Reduces the probability of triggering Auto-Deleveraging (ADL).

How the Insurance Fund Works

When a position is liquidated, the system attempts to close it at a price no worse than the bankruptcy price.

• If the actual fill price is better than the bankruptcy price, the remaining margin is contributed to the insurance fund.

• If the actual fill price is worse than the bankruptcy price, the insurance fund covers the shortfall.

Bankruptcy Price

The bankruptcy price is the price level at which a trader's entire initial margin is fully depleted.

When the price reaches the bankruptcy price:

• The trader's margin balance reaches zero.

• The position can no longer sustain further losses.

• Any further losses must be covered by the insurance fund or the Auto-Deleveraging (ADL) mechanism.

Insurance Fund Depletion

Under extreme market conditions, multiple large liquidations may occur simultaneously.

If losses exceed the available balance of the insurance fund:

• The fund balance may fall below a predefined safety threshold.

• The system will escalate to the Auto-Deleveraging (ADL) mechanism to maintain system solvency.