The Liquidation Engine of the Digitex Futures exchange takes over and liquidates the positions of traders whose account balances have dropped below the required Maintenance Margin amount needed to maintain their open position. Any funds made from this by the exchange are allocated to the Insurance Fund.
The exchange stops out the trader at the bankruptcy price as if he or she lost the entire Initial Margin posted to open the position. This way, it is possible that the exchange obtains a better price. All additional funds made in this situation are deposited into the Insurance Fund. Any losses suffered by the exchange when a trader loses more than their account balance are covered by the same Insurance Fund. This ensures stability and liquidity on the Digitex Futures markets and eliminates counterparty risk.
The profits made by the Liquidation Engine for the Insurance Fund typically come from high risk, highly leveraged traders who accept that forcing the exchange to take over their position may result in bigger losses than if they managed their position more responsibly.