What Are Safety Mechanisms?
Safety mechanisms are the checks and protocols that sit between your capital and everything that can go wrong. Delta-neutral funding sounds simple: you’re hedged, you collect funding. In practice, things break. We assume the worst and build layers that guard at every phase. We’d rather skip a trade or exit early than hope and hold. We check every trade before it opens, make sure both legs fill before calling it open, watch margin continuously and act before the edge, handle exchange outages, and keep a kill switch separate from the trading engine so it can stop everything even if the engine hangs. The auto-close pipeline is live. Several other layers are designed and being rolled out. We’ve tested every guard against 7 historical crashes. For the exit side, see Auto-close. Below we spell out each risk we guard against and how we handle it.The Problems We Guard Against (and How)
Bad Entry: Taking a Trade That Doesn’t Pay
The problem. You open a position when funding looks good, but it flips negative an hour later. Or the spread is too tight and fees eat your edge. Or the trade is so crowded that ADL risk is sky-high. You’re in before you know it’s a bad idea. How we protect. We run pre-entry gates before opening any position. If any gate fails, we skip. Missing a trade is better than entering a bad one.| Gate | What It Checks | Pass Condition |
|---|---|---|
| Funding profitability | Is the funding diff worth it? | Current diff above the recent historical range; funding positive for multiple intervals in a row |
| Trade profitability | Does the spread allow profit after costs? | Net entry cost within acceptable range; break-even under 48h |
| Cross-market spread | Is spread wide enough for execution? | Current spread above its recent average |
| Open interest crowding | Is the trade too crowded? | OI not in the top percentile of its range |
| Volatility circuit breaker | Has price moved too much lately? | Recent move within normal bounds |
| Basis Z-score | Is perp premium overstretched? | Not too far above fair value |
| Liquidation buffer | Enough margin cushion after entry? | Sufficient buffer relative to recent volatility |
| Insurance fund | Is the exchange’s safety net healthy? | Insurance balance above its recent average |
| ADL level | How close are we to ADL risk? | ADL indicator in the safe range |
| Oracle freshness | Is the price feed up to date? | Within the freshness threshold for each venue |
| Order book depth | Can we exit if we need to? | Enough liquidity on both sides to absorb the position |
| Leverage | Hard cap on leverage | Conservative limit, stricter for smaller assets |
Half-Open Positions: One Leg Fills, the Other Fails
The problem. You’re running two legs, long on one venue and short on another. Leg 1 fills. Leg 2 fails. You’re now directional and exposed. One bad move and you’re liquidated. How we protect. For same-chain pairs, both legs go in a single atomic transaction. Both open or neither opens. For cross-venue pairs, if the second leg fails we immediately close the first. If that rollback works, nothing is left open and we notify you. If it fails, we flag it for manual review and alert you immediately. You’re never left half-open without explicit notification. We also verify every fill. If what came back is short of what we requested, we retry the remainder or close the partial. If the two legs are mismatched after execution, we rebalance or close both.Margin Creep: Drifting Toward Liquidation Without Warning
The problem. Margin drops slowly, then suddenly. By the time you notice, you’re one move from liquidation. How we protect. We act in tiers so there’s time to react before things get critical.| Tier | Margin Ratio | What We Do |
|---|---|---|
| 1 – Healthy | > 300% | Monitor only; no action |
| 2 – Warning | 200–300% | Alert; stop new entries; tighten take-profit |
| 3 – Danger | 150–200% | Reduce position; add collateral if needed; cancel all orders |
| 4 – Emergency | under 150% | Close everything. See Auto-close for how and when. |