Transparency

Each market sets an initial-margin and a maintenance-margin requirement. Opening a position locks initial margin. If your account equity falls below maintenance margin, your position can be liquidated by anyone running a keeper — liquidation is permissionless, not discretionary, so it does not wait for a Vega operator to act.

Liquidation is evaluated on the portfolio, not one position at a time. A profitable position can be closed as part of resolving an account that is underwater overall.

If a liquidation closes an account for less than it owed, the difference is a shortfall that someone has to absorb. Vega applies it in a fixed order:

1. Insurance fund — the shortfall is drawn from the insurance balance first, if there is one.

2. Auto-deleveraging (ADL) — whatever insurance cannot cover is socialised across profitable traders on the opposite side of that market.

3. Recorded bad debt — if the ADL ladder is exhausted and shortfall remains, the residual is recorded on-chain as cumulative bad debt. That figure only ever increases; it is a running total, not a balance that gets paid down.

When a bankrupt account leaves an uncovered shortfall, ADL claws back unrealised profit from traders holding the opposite side of that market. If a long went bankrupt, profitable shorts are the victims, and vice versa.

Victims are ranked by profit × leverage, highest first, and clawed back in that order until the shortfall is absorbed or the ladder runs out. Victims are priced off the market's live oracle at the time ADL runs.

The practical consequence: being right can still cost you. A winning position can be reduced because someone on the other side was liquidated below their collateral. The more profitable and more leveraged your position, the earlier you are in the queue.

The insurance fund is the buffer that is meant to absorb shortfalls before they reach profitable traders. It has a configurable floor beneath which withdrawals are refused.

As of 15 August 2026 the insurance balance on devnet is $0, against roughly $1.93M of cumulative recorded shortfall.

With an empty fund, step 1 of the waterfall does nothing and every dollar of shortfall goes straight to ADL — out of profitable traders' gains, with no buffer in front of them. The insurance vault also went uncreated for the protocol's entire early life, so that step had never executed at all until it was fixed.

This is disclosed because it changes your risk materially. An insurance fund that exists in the design but holds nothing is not protection.

Perpetuals have no expiry, so a periodic funding payment pulls the contract price toward the underlying index. Depending on the side you hold and the sign of the rate, you either pay or receive it. Holding a position through many funding intervals can cost more than the price move itself.

Marks, margin and liquidation all depend on Pyth Network price feeds. If a feed stops updating or moves sharply, that flows directly into liquidation and ADL. Circuit checks exist on oracle staleness and deviation, and a market whose feed is unusable can stop accepting orders rather than trade on a bad price.

Orders that rest in the book and are filled pay the maker fee. Orders that cross the spread pay the taker fee. A limit order can be either, depending on whether it crosses when submitted.