ADL Ranking Algorithm

Learn how ADL ranks traders by unrealized profit percentage and effective leverage to determine deleveraging order.

Selection of Traders (Ranking System): When ADL is triggered, Roxom uses a transparent, rules-based ranking algorithm to determine which traders’ positions will be reduced first.

The ranking algorithm considers two factors for each opposing trader (traders on the opposite side of the defaulting position):

1. Profit Percentage: How much profit (percentage-wise) the trader’s position has unrealized at that moment. This measures how far “in the money” their position is due to the market move.
2. Leverage (Risk Usage): The effective leverage or margin ratio of that position. Traders using very high leverage (i.e. with relatively little collateral for a large position) are considered to be taking more risk.

Traders with the highest profit % and highest leverage are ranked at the top for ADL. The logic is that those who gained the most from the market move and did so with high risk are the ones who will first shoulder the burden of the extreme event. Conversely, traders with smaller profits or who were using lower leverage (more conservative) are less likely to be affected by ADL.

Each open position receives an ADL Score, a numerical value reflecting how “high-risk and high-profit” the position is.
The score is based on three factors:

1. Profitability

How much unrealized profit the position currently has.

2. Risk Usage

Effective leverage and position size: higher leverage and larger positions increase the score.

3. Position Side

Longs and shorts are treated differently depending on market direction and liquidation context.

These inputs are combined into a single score used for ranking.