ADL Overview & Triggers

Auto-Deleveraging (ADL) is Roxom’s last-resort mechanism for extreme black swan scenarios where liquidation losses exceed or exhaust the Insurance Fund.

Auto-Deleveraging (ADL) is Roxom’s last-resort mechanism to address losses that remain after the Insurance Fund has been applied. While Roxom does everything possible to avoid ADL (and expects it to be extremely rare), ADL exists to handle an extreme “black swan” scenario – a situation where a trader’s losses are so large and sudden that they exhaust the Insurance Fund or exceed what the fund can cover. ADL ensures the exchange remains solvent by redistributing the remaining loss to other traders in a predefined, rules-based way.

When ADL activates: trigger conditions

ADL only triggers under exceptional circumstances:

1. A position has been liquidated

The system attempted to close the trader’s position at the bankruptcy price.

2. The liquidation could not be fully executed

Market conditions prevented the position from being closed without leaving a deficit.

3. The Insurance Fund is insufficient

The remaining loss exceeds the available balance in the Insurance Fund.

If all three conditions are met, ADL activates.
This generally only occurs during extreme events. For example, a violent, sudden market crash or a liquidity shock where prices gap far beyond the normal trading range.