Skip to content

Socialized Loss

A socialized loss is a loss allocation mechanism in which certain trading losses that cannot otherwise be covered are distributed among a wider group of market participants according to a platform's rules.

Why it matters to you

Different derivatives platforms handle extreme losses differently. Insurance funds, auto deleveraging and socialized loss mechanisms are all approaches designed to deal with situations where a losing position creates a deficit that cannot be resolved through normal liquidation. Understanding the platform's approach is part of understanding exchange risk.

See the perpetuals front

The tools, the live market and the course.