Is a Depleted Fund a Sign of Poor Risk Management by the Exchange?

A depleted fund is a sign of extreme market stress, which may or may not be due to poor risk management. While a fund should be large enough to handle typical volatility, a sudden, unprecedented 'black swan' event can overwhelm even a well-managed fund.

However, chronic depletion or a fund that is consistently too small for the leverage offered is a clear indicator of insufficient risk controls by the exchange.