I．What is the Backstop Liquidity Provider Program?

The Backstop Liquidity Provider Program is a mechanism adopted by AscendEX Futures to address liquidity risks.

When an adverse market movement causes an account on the platform to be liquidated, AscendEX Futures will first attempt to deleverage the account by reducing the account’s position on the contract’s relevant order book. If the market continues to move against the account’s position or there is insufficient liquidity for the market to absorb risk efficiently, AscendEX Futures will take over the distressed positions held by the account and transfer them to institutions that have opted into the Backstop Liquidity Provider Program (“BLPs”). BLPs agree to assist in reducing the liquidation risk based on their capacity to take over positions per minute and per hour.

 

II. Advantages of the Backstop Liquidity Provider Program

Handing over positions on the verge of bankruptcy to BLPs minimizes the shared risk resulting from forced liquidation. BLPs can choose to take over these positions themselves or sell them through other channels to hedge the risk.

The Backstop Liquidity Provider program also helps service providers mitigate market risks in the following two respects:

1. When service providers take over distressed orders at less favorable prices (the price of long positions above the market price; the price of short positions below the market price), the Backstop Liquidity Provider program offers a discount of 1% compared to the market price of the distressed positions, thereby reducing the risk for BLPs. Additionally, distressed orders are allocated based on the service provider's per-minute and per-hour capacity to take over positions for reduced risk exposure.

2. According to the minimum takeover requirement, a BLP account may enter the automatic liquidation process due to excessive leverage after taking over distressed orders. Risk-averse BLPs will no longer accept orders once the number of distressed orders they have taken over exceeds their "nominal threshold of maximum holdings."

 

III. Benefits of the Backstop Liquidity Provider Program

Service providers that opt in to the BLP program can enjoy the following benefits:

1. Priority access to distressed positions at a favorable price (i.e. the price of longs below the market price and the price of shorts above the market price); thus, providing the opportunity to flip these positions for profit on AscendEX Futures or other platforms.

2. Access to the platform’s most favorable fee structure in futures trading.