Auto-Deleveraging (ADL)

What is Auto-Deleveraging?

Auto-Deleveraging (ADL) is a last-resort risk management mechanism used by the platform to maintain market stability. It is triggered in extreme market conditions when:

• A counterparty’s losses exceed the coverage of the insurance fund.

• The liquidation engine fails to close a liquidated position at or above the bankruptcy price.

• The platform faces position imbalances due to extreme volatility, liquidity shortages, or force majeure.

When ADL is triggered, the system forcefully reduces the positions of users with the highest leverage and return, executing their trades against liquidated counterparties.

ADL Ranking System

Traders are ranked for ADL based on their leverage-adjusted returns.

ADL Priority Indicator

Each position has an ADL indicator light, ranging from 1 to 5 bars:

• More bars = Higher ADL risk

• 5 bars = Top of the ADL queue

ADL Sorting Rules

• If the position is profitable:

$$\text{Ranking Score} = \text{Profit \%} \times \text{Effective Leverage}$$

• If the position is losing:

$$\text{Ranking Score} = \frac{\text{Profit \%}}{\text{Effective Leverage}}$$

Effective Leverage:

$$\text{Effective Leverage} = \left| \frac{\text{Mark Price}}{\text{Mark Price} - \text{Bankruptcy Price}} \right|$$

Profit Percentage Formulas

Forward Contracts

• Long:

$$\text{Profit \%} = \frac{\text{Mark Price} - \text{Entry Price}}{\text{Entry Price}}$$

• Short:

$$\text{Profit \%} = \frac{\text{Entry Price} - \text{Mark Price}}{\text{Entry Price}}$$

Reverse Contracts

• Long:

$$\text{Profit \%} = \frac{\text{Entry Price} - \text{Mark Price}}{\text{Entry Price}}$$

• Short:

$$\text{Profit \%} = \frac{\text{Mark Price} - \text{Entry Price}}{\text{Entry Price}}$$

When is ADL Triggered?

When a liquidated position cannot be closed at or above the bankruptcy price, even after using insurance fund compensation, the platform activates the ADL engine.

• The ADL system selects top-ranked counterparties from the opposite direction to match and settle the position.

• ADL executes trades at the post-compensation price.

Margin Modes:

• Isolated Margin: Long and short positions may both be subject to ADL.

• Cross Margin: Only unhedged portions of positions are subject to ADL. Fully hedged positions are not affected.

⚠️ No trading fees are charged for positions closed via ADL.

ADL Execution & Notifications

Once ADL is completed:

• The corresponding position is closed.

• The profit from the position is added to the account balance.

• Users receive email/SMS notifications.

• A record labeled "ADL" appears in the trade history.

• Users are free to re-enter the market.

Example: BTC/USDT Contract

• Trader Balance: 10,000 USDT

• Position: Long 5 BTC at 20,000 USDT with 10× leverage

• Liquidation Price: 19,090 USDT

• Bankruptcy Price: 19,000 USDT

• Post-Insurance Price: 18,090 USDT

If the liquidation engine cannot close the position at or above 18,090, the ADL system takes over.

Assuming the platform has 5 short (opposite) positions, here’s how ADL prioritizes them:

User	Short BTC	ADL Ranking Score	ADL Rank Tier
A	3	5	Top 0–20% (🟧🟧🟧🟧🟧)
B	3	4	Top 20–40% (🟧🟧🟧🟧)
C	2	3	Top 40–60% (🟧🟧🟧)
D	2	2	Top 60–80% (🟧🟧)
E	3	1	Top 80–100% (🟧)

→ User A’s 3 BTC and User B’s 2 BTC are used to absorb the liquidated long. → User B’s remaining 1 BTC is not affected.

Reducing ADL Risk

While ADL is rare and only triggered during extreme volatility, traders can reduce ADL risk by:

• Lowering leverage: Reduces ADL rank instantly

• Reducing position size: Especially helpful for highly profitable positions

• Using cross-margin hedging: Fully hedged positions are ADL-protected