Auto-deleverage (ADL) is the algorithm that searches for counterparties to forcibly close
the position of the liquidation engine. ADL can only happen if the Insurance Fund is
depleted for a given instrument which is highly unlikely.
ADL starts with the ranking of clients’ portfolios to define counterparties for closing the
position of the liquidation engine.
The clients are ranked using the following criteria:
- Open positions that are opposite to the one that has to be closed
- High unrealized PNL for a position in a given instrument
- High level of leverage
The liquidated position will be closed using the positions of ranked clients starting from
the clients with the highest-ranking until the positions that have to be closed by the ADL
engine is not closed in full. The ADL price is the same for all clients.