ADL Execution Process

Learn how ADL sequentially closes profitable opposing positions at Mark Price to cover liquidation shortfalls.

Process of Deleveraging: When Auto-Deleveraging (ADL) activates, the system begins reducing positions of the highest-ranked traders on the opposite side of the market, meaning traders who are currently profitable relative to the liquidating position. Positions are reduced sequentially, one trader at a time, until the shortfall has been fully resolved.

1. When ADL Triggers

ADL only activates under exceptional conditions:

• A position has been liquidated
• The system cannot close it at the bankruptcy price
• The insurance fund is insufficient to absorb the remaining loss

In these rare cases, the system must redistribute risk by closing profitable positions on the opposite side.

2. How Traders Are Ranked

Every open position receives two metrics:

• ADL Score: based on the trader’s profitability and effective leverage
• ADL Rank (0-5): shown in the UI as 5 lights (0 = safest, 5 = most likely to be deleveraged)

A dedicated ranking job continuously:

1. Computes ADL scores per instrument
2. Sorts all positions by their score
3. Assigns ranks, from lowest-risk to highest-risk

The traders at the top of this ranking are the first candidates for ADL.

3. How the Deleveraging Process Works

Once ADL begins, the system processes profitable opposite-side positions in order of highest ADL score.

Step 1: Target Identification

• The system selects positions in the same instrument and opposite direction
• Positions are ordered from highest ADL score to lowest
• The top-ranked trader becomes the first ADL target

Step 2: Sequential Reduction

Starting with the highest-ranked position:

• Roxom creates a special AutoDeleverage (ADL) order
• This order closes part or all of the trader’s position
• Execution happens instantly at the current Mark Price
• There is no slippage and no fees
• The impacted position temporarily enters Status::ADL

Step 3: Position-by-Position Processing

For each trader in the queue:

1. First Trader:
   The system closes as much of their position as needed to cover part of the shortfall.
2. If shortfall remains:
   Move to the next trader based on ADL ranking.
3. Continue:
   The process repeats down the list, closing portions of profitable positions until the entire deficit is eliminated.
4. Notifications:
   Each affected trader receives an ADL execution notification.

Step 4: Completion

• Once the total shortfall has been fully absorbed, ADL stops immediately
• No further positions are touched
• All remaining positions return to normal status