Auto-Deleveraging (ADL) rules
Auto-deleveraging, abbreviated as ADL, refers to a mechanism for liquidation of counterparty positions to control the platform's overall risk when extreme market conditions or force majeure lead to insufficient insurance fund or rapid decline of the insurance fund. At present, the rapid decline means that the insurance fund has dropped by 30% from the peak within 8 hours, and the platform may adjust it according to market conditions in the future. After ADL is triggered, the platform will no longer use the method of placing orders on the market and waiting for a suitable price to liquidate or partially liquidate user's positions, but directly find the counterparty account with the highest ranking and trade with the mark price at the time. After the transaction is completed, the counterparty position will be closed. The profits from the position will be added to the account balance. When the mechanism is adopted, the clawback will no longer be triggered.
ADL's counterparty ranking is determined by the following rules, including account risk or position risk, and the return rate of the contract position:
P/L Ratio = Unrealized PnL / Starting Margin
If (Initial Margin + Unrealized P&L) ≤ 0, Margin Ratio is 0
If (Initial Margin + Unrealized P&L) > 0, Margin Ratio = Maintenance Margin / (Initial Margin + Unrealized P&L)
Leverage Gain = Margin Ratio * P/L Ratio
ADL Rank = Leverage Gain / ∑ Total User Leverage Gain
According to the above rules, the higher the return rate and the lower the position margin ratio, the more likely the account to be used as ADL counterparties, facing the risk of automatically deleveraging.
After their positions are automatically deleveraged, users will receive text messages and email notifications to inform them of the related positions and prices. They can also find the bills on the report center page with a bill type of auto-deleveraging.