Margin, Liquidation and Loss Allocation Rules
Updated: 9 May 2026
1. Status of these rules
1.1 These Margin, Liquidation and Loss Allocation Rules form part of the Trading Rules incorporated into the Terms of Use.
1.2 These rules apply to margin, collateral, liquidation, partial liquidation, auctions, position transfer, cash settlement, forced settlement, insurance fund usage, security module usage, clawback, socialised loss, delayed settlement, adjusted settlement, and other risk or loss allocation processes associated with the Application or Derive Protocol.
2. User responsibility
2.1 You are responsible for monitoring your margin, collateral, positions, account health, liquidation risk, settlement risk, and expiry risk at all times.
2.2 The Application may display account health, margin, liquidation, mark price, collateral, or other risk information, but no display is guaranteed to be accurate, complete, current, continuous, or sufficient for your purposes. You must not rely solely on Application-displayed risk information for margin management, position monitoring, or liquidation risk assessment. You are responsible for independently verifying your margin, collateral, and position status.
2.3 You must maintain sufficient collateral and margin for all positions and potential obligations.
3. Liquidation and risk management
3.1 The Derive Protocol may liquidate, partially liquidate, auction, close, transfer, deleverage, cash-settle, force-settle, or otherwise adjust positions or collateral where required by the applicable risk framework, smart contract design, governance decision, market integrity process, liquidation process, or settlement process.
3.2 Liquidation or risk management processes may occur automatically, algorithmically, manually through available Application functionality or governance processes, through smart contract functions, through auctions, through RFQs, through third-party liquidators, through market makers, through governance, or through related operational processes.
3.3 Liquidation may occur earlier, later, differently, partially, or fully depending on market conditions, liquidity, risk parameters, account state, collateral type, market maker activity, oracle conditions, settlement conditions, and technical or operational constraints.
4. Insurance fund, clawback and socialised loss
4.1 In extreme circumstances, including market disruption, liquidity shortfall, oracle disruption, insolvency, insurance fund depletion, security module issue, smart contract issue, Mistrade, Erroneous Transaction, settlement issue, liquidation issue, governance decision, regulatory action or order, or other extraordinary event, profitable accounts may be subject to clawback, socialised loss, delayed settlement, adjusted settlement, forced deleveraging, or other loss allocation processes.
4.2 These processes may affect profitable positions, accounts that do not themselves breach margin requirements, or users that did not cause the relevant shortfall, where this is required by the protocol design, governance decision, applicable risk framework, market integrity process, settlement process, liquidation process, or extreme market circumstances.
4.3 No user has any guaranteed right to be protected by the insurance fund, security module, liquidation process, market maker, liquidity provider, or other participant. The insurance fund, security module, and related risk mechanisms are operational features of the Derive Protocol and are subject to depletion, governance decisions, technical constraints, and other limitations. Their availability at any particular time is not guaranteed.
