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1Scan for outdated or missing drivers - takes under a minute2Clear out junk files and repair common Windows errors3Fix the driver behind crashes, sound loss and screen glitchesBefore trading a perpetual futures contract, check how funding is charged, what margin and price trigger liquidation, how the venue handles losses it cannot close out, and what risks come with the contract’s collateral and settlement assets. Perpetuals have no expiry date; funding helps encourage their price to track a spot reference, while leverage and venue rules determine how a position can lose money or be liquidated.
How perpetual futures create risk
A perpetual future, or perp, is a leveraged derivative with no fixed expiry. Unlike a dated future, it has no expiration date at which the contract must converge with its underlying reference. Instead, periodic funding payments between long and short holders encourage the perpetual price to track a spot reference. Depending on the funding rate and which side of the position you hold, you may pay or receive funding. The rate and payment rules are product-specific. The SFC’s framework and a 2026 submission to the SEC describe these mechanisms and associated risks.
Leverage lets a trader establish exposure larger than the margin posted, but it also leaves less room to absorb an adverse move. For illustration, the SEC submission describes a $100 position backed by $10 of margin as 10-to-1 leverage. That is an explanatory example, not a venue rule or a recommended position size. If losses reduce available margin to the contract’s maintenance threshold, the venue may forcibly liquidate some or all of the position.
Risk depends on more than the advertised maximum leverage. The contract’s initial and maintenance margin, liquidation process, price references, liquidity, fees, collateral, and loss-allocation rules all affect what can happen. Two contracts referencing the same asset may therefore have materially different risks.
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What to check before opening a position
Funding and the cost of holding the position
Find the funding formula, the data and calculation window it uses, payment frequency, any cap, and the asset in which funding is settled. Verify which side pays at positive and negative rates, and whether a payment changes the position’s margin or profit and loss. Compare the product’s historical and projected funding information with your planned holding period; a rate observed at one moment does not establish what you will pay over time.
Funding can be a holding cost or a receipt, and persistent payments can materially affect a position’s economics. But a high rate by itself does not establish manipulation or malfunction. In their SEC submission, Ariel Zetlin-Jones, Bryan R. Routledge, and Nicolas Christin argue that funding can reflect demand for leveraged exposure, while noting that economically large, persistent payments may be difficult for less experienced traders to understand. This is the authors’ analysis, not an SEC finding.
The SFC framework calls for funding inputs and settlement frequency to be disclosed and specifies settlement at least once every 24 hours for platforms within its scope. That cadence is not a universal rule for all venues or jurisdictions.
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Leverage, initial margin, and maintenance margin
Compare the position’s notional exposure with the collateral required to open it. Identify initial margin, maintenance margin, any tiered requirements for larger positions, leverage limits, and whether margin is isolated to this position or shared across positions. Then determine the exact threshold and process that can initiate liquidation.
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Repair common Windows errors and clear accumulated junk for a smoother, more stable PC - no reinstall needed.Free scan · no reinstallHigher initial margin and an earlier liquidation threshold can reduce the chance of an account shortfall, but they can also make liquidation more likely during a temporary adverse move. Maximum leverage alone does not capture this trade-off: margin levels, liquidation policy, market liquidity, and resources available to absorb a shortfall interact.
Liquidation and the chance of worse execution
Read whether liquidation is partial or full, which price triggers it, what fees apply, and how the venue tries to close the position. Find out what happens if the order book cannot absorb the closing trade. A trigger price is not a guarantee that the position will be closed at that price: in a fast market, a gap, limited liquidity, or a delay can worsen execution, and losses may continue while liquidation is underway.
Liquidations can also add selling or buying pressure to a volatile market, potentially contributing to cascading liquidations. The SFC framework identifies cascading liquidations, price gaps, limited liquidity, and difficulty closing positions as risks that platforms in its scope should disclose.
Mark price, index, and the spot-price gap
Ask which markets feed the index, how the venue handles outliers or outages, how often reference data updates, and how the mark price is derived. The SFC framework calls for transparent, objectively verifiable price methods, timely data, multiple independent sources for references used in margining and liquidation, and automatic failover for disrupted inputs.
A mark price is used to calculate mark-to-market profit and loss and may trigger liquidation; it is not necessarily the latest traded price on the venue. The contract price and reference price can diverge, particularly in volatile conditions. As a result, looking only at one venue’s last-traded price may not tell you how the position is valued or whether it is near liquidation.
Collateral, settlement, and venue loss rules
Check which asset you must post as collateral and which asset the contract uses for settlement. A contract settled in a stablecoin and one settled in the underlying coin can have different risk properties even if both reference the same cryptocurrency. Consider whether the collateral itself could lose value alongside the position. Review the venue’s custody, segregation, and insolvency disclosures rather than assuming that posted collateral will be treated the same everywhere.
Read the venue’s default-management order: how it attempts an order-book liquidation, whether backstop liquidity providers are used, and how an insurance or reserve fund, auto-deleveraging (ADL), or another loss-sharing mechanism may apply. Determine when the venue can reduce or close a non-defaulting trader’s position. A fund’s existence does not prove that it will be sufficient or available in every scenario; check its current rules, triggers, parameters, and disclosed levels.
Liquidity, fees, and operational resilience
Check order-book depth at the size you are considering and how slippage could affect entry or exit. Add trading and liquidation fees to the expected holding cost, including funding. Review what the venue says about outages or disrupted markets and how it handles trading, settlement, and liquidation during extreme but plausible conditions. There is no universal liquidity threshold or fee level established here; both depend on the specific contract and venue.
Compare contracts using the same questions
When evaluating multiple contracts or venues, compare their published specifications rather than assuming that similar names imply similar protections.
| What to compare | What to verify | Why it matters |
|---|---|---|
| Funding | Formula, cap, calculation window, payment frequency, and settlement asset | Determines who pays, how often, and how holding costs or receipts may affect the position |
| Margin and leverage | Initial and maintenance margin, leverage tiers, and isolated or shared margin | Shapes the available buffer and the conditions that can lead to liquidation |
| Price references | Index sources, mark-price method, update frequency, and outage handling | Affects valuation and the price used to trigger liquidation |
| Liquidation | Trigger, partial or full process, fees, and treatment when an order book cannot absorb a close | Shows how forced exits are attempted and what may happen in a stressed market |
| Collateral and custody | Accepted collateral, settlement asset, custody and segregation, and insolvency treatment | Reveals risks beyond the underlying asset’s price movement |
| Default management | Insurance or reserve funds, backstop liquidity, ADL, and other loss-sharing rules | Explains how a liquidation shortfall may be handled and whether other positions can be affected |
| Trading conditions | Order-book depth, fees, slippage, and outage procedures | Influences the cost and feasibility of entering or closing a position |
| Jurisdiction and eligibility | Applicable regulator, client eligibility, and protections for this platform and contract | Rules and access conditions are not the same in every jurisdiction |
Check which rules apply where you trade
The SFC’s high-level framework, last updated 11 February 2026, applies to virtual asset trading platforms licensed in Hong Kong. It says platforms within its framework should offer perps only to professional investors and assess a client’s derivatives knowledge before providing perps trading services. Those requirements are specific to that Hong Kong framework, not a general eligibility rule for every venue or trader. Check the rules and platform terms that apply to your location.
The SEC document cited above is a submission by named authors, not an SEC finding or adopted rule. Its analysis does not establish that perpetual futures are categorically harmful or beneficial, nor that a high funding rate alone proves abuse. The cited sources do not establish a universal current funding cost, liquidation rate, or trader-loss figure, so venue- or study-specific numbers should not be treated as market-wide facts.
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