Introduction to Hibt Futures Insurance Funds
What are Hibt Futures Insurance Funds?
Hibt Futures Insurance Funds are safety nets designed to limit the impact of liquidations. They protect traders from losses caused by Bankrupt Positions while helping to ensure that profits from in-the-money positions are fully paid out to profitable traders.
Hibt maintains one or more Futures Insurance Funds. The assets of each Fund may be held in one or more wallets, and the coverage of each Fund is calibrated by Hibt. The assets of the Fund are used solely to cover losses arising from the relevant category of contracts (USDT-margined contracts). Hibt may adjust the size and allocation of the Funds at its discretion.
Notwithstanding the use of the term “insurance”, the Futures Insurance Funds are not insurance products, and Hibt is not an insurer. The Funds are provided solely to mitigate counterparty risks arising from futures liquidations and do not guarantee users against losses. You must not rely on the Futures Insurance Funds as a substitute for your own risk management.
How do Hibt Futures Insurance Funds work?
A trader’s position will be liquidated if the collateral provided is insufficient to maintain the position. If the position’s balance is negative after liquidation, or if the position cannot be liquidated, it is considered a Bankrupt Position.
The Futures Insurance Funds will take over Bankrupt Positions whenever possible. Any losses arising from Bankrupt Positions will be covered by the relevant Fund, while any profits from Bankrupt Positions will be credited to the Fund.
If the unrealized losses from Bankrupt Positions exceed the available balance of the Fund, the system will trigger the Auto-Deleveraging (ADL) mechanism.
Please note that the Fund does not cover traders’ personal losses. Its sole purpose is to cover the difference between the bankruptcy price and the execution price of the liquidation order. Traders cannot claim compensation directly from the Fund.
How is the minimum size of the Futures Insurance Fund determined?
The required minimum size of the Fund is dynamically calibrated to cover potential losses arising from Bankrupt Positions in USDT-margined contracts.
The methodology follows practices used in traditional financial futures markets, aligns with regulatory expectations, and is based on a 99.9% confidence interval combined with historical stress tests to simulate extreme but plausible market scenarios.
Note: the 99.9% confidence interval is not directly related to the occurrence of ADL and does not imply that ADL will not occur in 99.9% of liquidation cases.
Hibt reviews and adjusts the required minimum size of the Fund on a quarterly basis or as deemed necessary.
How are Futures Insurance Funds funded and maintained?
When a position is liquidated and does not become a Bankrupt Position, a portion of the liquidation fees may be allocated to the Fund. Hibt may allocate part or all of these fees to the Fund.
If the Fund takes over a Bankrupt Position, any profits generated by that position will also be credited to the Fund.
The size of the Fund is continuously monitored. If it falls below the required minimum, Hibt will top up the Fund to ensure adequacy.
What happens if the Fund is insufficient to cover losses?
If the Fund cannot cover losses from Bankrupt Positions, Hibt will trigger the Auto-Deleveraging (ADL) mechanism.
The system ranks positions by leverage and profit, and automatically deleverages certain positions to cover losses from Bankrupt Positions.
Scope of Application (USDT-margined contracts only)
Currently, all USDT-margined contracts on Hibt are covered by the same Futures Insurance Fund.
You can view the Fund balance (USDT) in the Hibt Futures interface under [Contract Info] → [Insurance Fund].