Auto Deleveraging (ADL)

If positions in a certain direction are instantaneously closed with large volumes, it could lead to a scenario where the net exposure exceeds that of the Liquidity Provided. In such cases, to ensure that traders' profits have a counterparty for settlement, it's necessary to forcibly reduce positions exceeding the liquidity provided, ensuring that both long and short positions on the platform have counterparties.

ADL (Auto-Deleveraging) Ranking:

• Contracts with the largest exposure value are prioritized for ADL.

• Positions opposite to the LP's exposure direction are chosen.

• Positions are ranked by leverage profit rate:

  • For profitable users: Position profit rate * leverage ratio.

  • For losing users: Position profit rate / leverage ratio.

• ADL stops when the exposure value of all contracts is zero.

• ADL execution price = Contract price at the time of trigger.

$$P_{adl}=(1+PR_0)P_{index}$$