Introduction to Auto-deleveraging (ADL)

Auto-Deleveraging (ADL) is a mechanism that enforces counterparty liquidation to control overall platform risk when extreme market conditions or force majeure events lead to a shortage or rapid depletion of the risk reserve. Currently, the conditions defining "risk reserve shortage" and "rapid depletion" are as follows:

ADL Trigger Conditions:

1. The risk reserve for the trading pair is completely depleted.
2. The risk reserve for the trading pair decreases sharply by 30% from its peak value.

 

ADL Stop Conditions:

The risk reserve is restored to more than 90% of its peak value.

 

At the same time, the platform may make adjustments based on market dynamics. Once ADL is triggered, the platform will no longer place orders in the market to match the user's liquidation positions. Instead, it will directly identify top-ranked counterparty accounts and conduct direct transactions with them at the takeover cost price, without charging fees. After the transaction is completed, the relevant contract positions of the counterparty account will be closed, and the position's profit will be converted into the account balance.

After using the auto-deleveraging strategy to handle bankruptcy losses, the platform will no longer carry out loss-sharing.

 

ADL Ranking

The ADL counterparty ranking is determined based on account risk or position risk and the profit rate of the

contract position. The specific rules are as follows:

 

Sorting Rule:

Counterparties are ranked by leverage profit from highest to lowest. Profitable positions are prioritized over

loss-making positions.

 

Leverage Profit Calculation:

1. If the trading pair's profit is negative or the position is undergoing a liquidation/deleveraging process:
   1. Leverage profit is set to 0.
2. Cross Margin Mode:
   1. Leverage Profit = Position Profit Rate × Leverage
   2. Position Profit Rate = Unrealized PnL / Position Value Calculated at Opening Price
   3. Position Value Calculated at Opening Price = Position Size × Average Entry Price
   4. Capital Leverage = Current Position Value / (Total Account Balance + Unrealized PnL from Cross Margin)
3. Isolated Margin Mode:
   1. Leverage Profit = Position Profit Rate × Leverage
   2. Position Profit Rate = Unrealized PnL / Position Value Calculated at Opening Price
   3. Position Value Calculated at Opening Price = Position Size × Average Entry Price
   4. Capital Leverage = Position Value / (Margin + Unrealized PnL)

Implications of Ranking:

Users with higher profits and higher capital leverage are more likely to be selected as ADL counterparties,

exposing them to the risk of auto-deleveraging.

 

Risk Indicator:

Users can monitor their auto-deleveraging risk in real-time via a signal indicator on the platform. The indicator

consists of five levels:

• 5 bars lit: The position ranks high among counterparties and has a high risk of auto-deleveraging.
• 1 bar lit: The position ranks lower, indicating a relatively low auto-deleveraging risk.

Notifications and Details:

After being subjected to auto-deleveraging, users will receive a notification detailing the reduced position and

the deleveraging price. Additionally, users can visit the order center to review the specifics of the auto-deleveraging

event, marked as "ADL Deleveraging."