PolyTerminal
What it takes over
The fund absorbs a position directly when an order-book liquidation is unlikely to recover its value. For a cross account it takes every cross position of the trader plus their quote balance. For an isolated position the liquidation page says it takes that one isolated position together with the margin set aside for it, while a newer changelog entry (Sep 21, 2026) says the transfer carries the live backing amount of the position, not its legacy margin amount. Once absorbed, the fund keeps the position and runs it like any other account.
When it cannot help
The fund steps in only if it stays healthy after taking the position. When it cannot, the exchange closes the position against traders on the other side, with no order-book matching and no draw on the fund. The liquidation guide shows where the fund sits among the steps of a liquidation.
A second use, and a loose end
Polymarket's changelog entry of Sep 27, 2026 adds one more case: an account that has no open positions and is left with negative cash is now settled against the insurance fund by the liquidator. The entry says such an account used to sit negative indefinitely.
The fund may not be the only recipient. The margin page mentions a Backstop Liquidity Provider program that an account can be subscribed to for an instrument, and a changelog entry of Sep 17, 2026 describes a history of transfers where an account received or provided backstop liquidity. The pages read for this entry do not define the program, so this entry does not say how it relates to the fund.
Sources and checks
Every rule quoted in this article comes from the registry below. Each row names the official page and the day it was compared with the text.
All 9 rules used in this article
| Rule | Value | Official source | Checked |
|---|---|---|---|
| When the insurance fund steps in | once equity drops under two-thirds of the maintenance margin | docs.polymarket.com/ | |
| What the insurance fund takes from a cross account | every cross position of the trader plus their quote balance | docs.polymarket.com/ | |
| What the insurance fund takes from an isolated position | that one isolated position together with the margin set aside for it | docs.polymarket.com/ | |
| What an isolated-position backstop transfers (changelog, Sep 21, 2026) | carries the live backing amount of the position, not its legacy margin amount | docs.polymarket.com/ | |
| What the insurance fund does with an absorbed position | keeps the position and runs it like any other account | docs.polymarket.com/ | |
| When the insurance fund can step in | only if it stays healthy after taking the position | docs.polymarket.com/ | |
| An account left with negative cash and no open positions (changelog, Sep 27, 2026) | is now settled against the insurance fund by the liquidator | docs.polymarket.com/ | |
| A program that the margin page names next to the insurance fund | a Backstop Liquidity Provider program that an account can be subscribed to for an instrument | docs.polymarket.com/ | |
| Backstop transfers listed in the account history (changelog, Sep 17, 2026) | received or provided backstop liquidity | docs.polymarket.com/ |
Related terms
Read the full guide
Perps · 8 min
Polymarket Perps Liquidation Explained
How liquidation works on Polymarket Perps: the trigger, the insurance fund, auto-deleveraging, the extra fee and how to read your distance to liquidation.
PolyTerminal is an independent interface for Polymarket and is not operated or endorsed by Polymarket. Orders placed through PolyTerminal carry PolyTerminal’s Polymarket builder code, and PolyTerminal may charge a builder fee on top of Polymarket’s own fees. This page is educational and is not investment advice. Rules were compared with the official documentation on Oct 19, 2026; check the source before you act on a number.