Auto-Deleveraging (ADL) Rules
- USDⓈ-margined Contracts guides
As a mechanism of liquidating counterparty positions to minimize the platform’s overall risk, Auto-Deleveraging (ADL) is only carried out in the event of depletion or rapid draw-down of the insurance fund, which may occur due to extreme market conditions or force majeure. Insurance fund draw-down means that within 8 hours, the total fund value has fallen from a previous peak value to a certain threshold value, which may vary slightly among different trading pairs, and is subject to adjustment in the future depending on market conditions and for the benefits of our users.
Once the ADL mechanism is triggered, instead of placing liquidation or position-reduction orders on the market and waiting for them to be filled, the platform will directly locate the counterparty accounts of the highest ranks and trade the liquidation orders with them at the then market price. Thus, after the transaction, the counterparty positions will be reduced and the funds from the closed positions will be added to their account balances. When the ADL mechanism is adopted, the clawback mechanism will not be used. At present, the ADL mechanism only applies to USDT-margined perpetuals and USDT-margined futures, and will be extended to coin-margined futures subsequently.
The counterparty position ranking for ADL is determined jointly by traders' account/position risk level (margin ratio) and position PnL ratio. Specifically:
Gaining position: Leveraged PnL = PnL ratio of the position / Margin ratio of the position
Losing position: Leveraged PnL =PnL ratio of the position * Margin ratio of the position
Gaining position: Leveraged PnL = PnL ratio of the position / Margin ratio of the account
Losing position: Leverage PnL =PnL ratio of the position * Margin ratio of the account
According to the ranking rules, the higher the PnL ratio and the lower the margin ratio of the position, the more likely the account is to be identified as a counterparty for auto-deleveraging. On the page, there is an ADL risk indicator that allows users to track the auto-deleveraging probability. The indicator is designed with 5 grids. When all 5 grids are on, the trader's position is ranked among the highest and the ADL risk is high. When only 1 grid is on, the trader's position is ranked low and the ADL risk is very low.
If and when one of your positions has undergone auto-deleveraging, a message and email will be sent to you to inform you of the position in concern and relevant execution prices. You can also find the details on the Orders page with the transaction labeled as auto-deleveraging.