Automatic Deleveraging Mechanism (ADL)

1. Definition:

When a user is subject to forced liquidation, if the market cannot execute at the forced liquidation bankruptcy price and there is a bankruptcy due to insufficient remaining funds to cover the loss, the system will trigger the automatic deleveraging (ADL) mechanism. The automatic deleveraging system will reduce the positions of users holding opposite positions, with the sequence of reduction based on profitability.

2. Calculation:

Specific rules are as follows:

Note: Aggregate the profit of all positions (long, short, isolated margin, cross margin, combined positions, and separated positions) under the same contract, and sort by the total profit of a single contract in descending order

U-Margin - Position Profit Rate:

• Long Profit Percentage = (Mark Price - Average Opening Price) / abs(Average Opening Price)
• Short Profit Percentage = (Average Opening Price - Mark Price) / abs(Average Opening Price)

Coin-Margin - Position Profit Rate:

• Long Profit Percentage = abs(Average Opening Price) / (1 / Average Opening Price - 1 / Mark Price)
• Short Profit Percentage = abs(Average Opening Price) / (1 / Mark Price - 1 / Average Opening Price)

Margin Rates:

• Position Margin Rate = (Fixed Margin + Unrealized Profit and Loss) / Position Value
• Account Margin Rate = (Balance + Realized Profit and Loss + Unrealized Profit and Loss) / (Position Value + Order Frozen Margin * Leverage)

3. ADL Indicator Light Explanation:

According to the above sorting rules, accounts with higher total position profitability and lower position margin rates are more likely to be selected as ADL counterparts and face the risk of automatic deleveraging. The 5-bar indicator shows the position in the ADL queue. If all indicator lights are on, your position may be reduced after an automatic liquidation event.

1. We rank all positions by profit and assign values by quantiles; those with smaller values are more likely to be reduced.
2. If users wish to avoid automatic deleveraging, they can close positions first and then reopen positions.

Example:

A user opens a BTCUSDT long contract with 50x leverage using 10,000 USDT, with a liquidation price of 9,000 USDT. Assuming the bankruptcy price is 8,500 USDT, if the mark price triggers the liquidation price, causing the position to be liquidated, the order will be placed at the bankruptcy price, i.e., 8,500 USDT.

If the market cannot execute at the bankruptcy price, i.e., 8,500 USDT, the automatic deleveraging system will be triggered.

Assuming there are currently 5 users who are short and in profit for this trading pair:

• User A, short 100 positions, profit ranking top 10%, 5 indicator lights on;
• User B, short 200 positions, profit ranking top 30%, 4 indicator lights on;
• User C, short 50 positions, profit ranking top 50%, 3 indicator lights on;
• User D, short 150 positions, profit ranking top 80%, 2 indicator lights on;
• User E, short 400 positions, profit ranking top 100%, 1 indicator light on.

If users hold both long and short positions, the number of indicator lights for both directions will be consistent. For example, if User A's short 100 positions are composed of 200 short and 100 long positions, both long and short indicator lights will be 5.

If the current user needs to be liquidated for 350 positions, users A, B, and C with profitable and higher-ranking positions will be selected for automatic deleveraging, and forced matching will be executed.

4. Post-Event Notification

After a user is automatically deleveraged, they will receive an email notification informing them of the reduced positions and the deleveraging price. You can also check the deleveraging order on the order center page, where the order type will be listed as ADL Deleveraging.