What is the security fund for on-chain perpetual futures?
Security fund, security vault, and supplementary fund FAQ for on-chain trading
The security fund, security vault, and supplementary fund collectively acts as a key component of on-chain trading's risk architecture, and is designed to act as a financial buffer that mitigates counterparty risks arising from leveraged and derivatives trading, including in particular perpetual futures contracts.The security fund, security vault, and supplementary fund consists of segregated pools of assets established and fully owned by OKX.This FAQ explains how on-chain trading uses the security fund, security vault, and supplementary fund to support liquidations on on-chain trading.
What's the difference between the security fund, security vault, and supplementary fund in on-chain trading?
Main purpose | Takes over positions | Places orders | Funds movement | |
|---|---|---|---|---|
Security fund | Takes over and closes liquidated positions for its mapped contracts | Yes | Yes | Receives manual funding from the security vault and automatic support from the supplementary fund; returns funds to the security vault manually |
Security vault | Holds reserve assets for rebalancing risk accounts | No | No | Sends funds manually to a security fund or the supplementary fund |
Supplementary fund | Provides automatic backup funding when a security fund needs support to take over liquidated positions | No | No | Sends funds automatically to a security fund when the takeover check finds a shortfall |
What's a security fund in on-chain trading?
A security fund is the active liquidation account for one or more mapped perpetual futures contracts. It can take over liquidated positions, place orders to reduce those positions, and absorb losses from the liquidation process.
Each contract maps to one security fund at a time, while one security fund can support several contracts.
What's a security vault in on-chain trading?
A security vault is the main reserve account that on-chain trading uses to manually rebalance the supplementary fund and all the security funds across all pools.
What's a supplementary fund in on-chain trading?
A supplementary fund is a backup reserve that automatically supports security funds. The supplementary fund is designed to automatically top up a security fund if a security fund's projected equity would fall below zero after taking over liquidated positions.
How do the funds work together during a liquidation?
The security fund is the account that takes over and closes liquidated positions. Before takeover, on-chain trading checks the projected equity of every affected security fund and deploys the security fund, security vault, and supplementary fund in accordance with our risk management mechanisms. Not all shortfalls may be covered by these funds and in situations where risk thresholds are reached, ADL may be triggered.
Why are the security vault and supplementary fund separate in on-chain trading?
They serve different control needs. The security vault is a manually managed reserve for planned rebalancing. The supplementary fund is an automatic backstop used during the takeover check, when a fast top-up can help the security fund absorb a liquidation and reduce the chance of ADL.
Where can I check security fund information in on-chain trading?
Open the "Security Fund" tab on "Market Info" page to check the latest account value for the available security fund, security vault, and supplementary fund. You can also check the aggregated platform's account value of these three funds, and which perpetual contracts are being covered by which security fund.
IMPORTANT DISCLOSURES AND DISCLAIMERS
1. Not an Insurance Product
The security fund, security vault, and supplementary fund (collectively, "Security Fund") is not an insurance policy, a custodial protection fund, or a guarantee against user losses. OKX and on-chain trading are not insurers, and the Security Fund does not cover losses arising from a user's individual trading decisions, security breaches, or unexpected market events. Users are always solely responsible for their own risk management.
2. No Guarantee of Individual Benefit
There is no guarantee, explicit or implied, that the Security Fund will be used to compensate or benefit any specific user or transaction in the event of a loss. The Security Fund is designed for on-chain trading's systemic stability, not for individual loss recovery. Users should not rely on the Security Fund as a substitute for adequate risk management and margin maintenance.
3. Absolute Discretion and No Beneficial Interest
The Security Fund is the sole property of OKX. Users have no beneficial interest, ownership rights, legal claim, or ability to direct the use of any assets held within the Security Fund. While intended for use in the manner described in this FAQ, OKX retains absolute and sole discretion over the establishment, maintenance, size, composition, and utilization (or non-utilization) of the Security Fund, including, but not limited to:
Determining the necessary size of the Security Fund.
Deciding if and when to deploy the Security Fund's assets.
Allocating or rebalancing assets within the Security Fund.
Deploying any funds for other purposes as the exchange deems appropriate.
Crypto products involve significant risk. Prices can go up and down, and you may get back less than you put in. This article is for informational purposes only and is not financial, investment, or tax advice. Please do your own research and seek independent advice before making any investment decisions.