Automatic Deleveraging (ADL)

When a trader is liquidated, their remaining position is taken over by Venkate's perpetual contract liquidation system. If the liquidated position cannot be closed in the market and the mark price reaches the bankruptcy price, the ADL system will deleverage positions of investors holding the opposite direction. The order of deleveraging is based on leverage and profit ratio.

ADL Ranking System

1. Deleveraging Process:
   • Close positions at the bankruptcy price of the liquidated trader's position.
   • If the insurance fund is insufficient, the ADL strategy is triggered.
   • Counterparties are ranked by effective leverage and PnL.
   • Aggressive and most profitable traders are prioritized in the ADL sequence.
   • Execute ADL on the marked positions at the bankruptcy price with the top-ranked traders.
2. ADL Indicator Light:
   • The ADL indicator light warns of potential ADL based on the ranking of all positions held in the contract (the highest position). The indicator shows the priority in the queue in 20% increments.
3. Automatic Deleveraging (ADL) Ranking Formula
   • ADL Ranking = Profit Percentage * Effective Leverage (if profitable)
   • ADL Ranking = Profit Percentage / Effective Leverage (if unprofitable)

Definitions:

• Effective Leverage = abs(Mark Price Value / (Mark Price Value - Bankruptcy Value))
• Profit Percentage = (Mark Price Value - Average Entry Price Value) / abs(Average Entry Price Value)
• Mark Price Value = Position value at the mark price
• Bankruptcy Value = Position value at the bankruptcy price
• Average Entry Price Value = Position value at the average entry price

The system separates long and short positions and ranks them from high to low.