Understanding Auto-Deleveraging
Auto-Deleveraging (ADL) is a specialized mechanism triggered during extreme market conditions to ensure the completion of forced liquidations. Unlike standard forced liquidation (which attempts orderbook matching), ADL directly pairs liquidated accounts with algorithm-selected counterparties at the mark price. This prevents systemic risks like undercollateralization and protects exchange solvency.
Key Scenarios Triggering ADL:
- Liquidation Failure: When an account’s maintenance margin ratio exceeds 200% due to insufficient market liquidity.
- Negative Equity: If collateral value drops below zero during forced liquidation.
How ADL Works
Leverage Profit Score Calculation
ADL counterparties are prioritized based on their Leverage Profit Score, computed as:
Leverage Profit Score = Account Margin Rate × Position Profit Rate Account Margin Rate Formulas:
Isolated Margin Mode:
(Total Maintenance Margin + ADL-triggered Option Positions × Underlying Price) / (Total Margin Balance + ADL-triggered Option Positions × Underlying Price)Portfolio Margin Mode:
Total Maintenance Margin / Total Collateral Value
Position Profit Rate Formulas:
Long Positions:
MAX((Mark Price − Entry Price) / Entry Price × 100%, 0)Short Positions:
MAX((Entry Price − Mark Price) / Entry Price × 100%, 0)
Tiebreaker Criteria:
- Larger position size.
- Higher position profit rate.
- Higher account margin rate.
Practical Example
Amy’s BTCUSD perpetual contract long position triggers ADL when her maintenance margin ratio surpasses 200%. The system evaluates counterparties (A, B, C, D) holding short positions:
- Account A ranks highest due to its Leverage Profit Score and becomes Amy’s counterparty.
👉 Learn how to monitor ADL risk in real-time
Managing ADL Risks
Monitoring ADL Exposure
- Check the indicator lights next to positions on the holdings page: more lit lights indicate higher ADL risk.
- Notifications via SMS/email detail reduced positions post-ADL.
Prevention Strategies
- Avoid excessive leverage and volatile markets.
- Lock in profits early to reduce ADL priority.
ADL not only safeguards liquidated accounts but also protects profitable traders by automatically deleveraging their positions—effectively locking in gains during turbulence.
FAQs
1. What happens during ADL?
ADL forcibly closes over-leveraged positions by matching them with profitable counterparties at the mark price, bypassing orderbook execution.
2. How is my ADL risk determined?
Your position’s Leverage Profit Score (based on margin rate and profitability) places you in the ADL queue. Higher scores = higher risk.
3. Can I re-enter a position after ADL?
Yes. Post-ADL, you may reopen positions at current market prices.
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This guide ensures compliance with BIT’s risk protocols while optimizing trader safety and market stability.