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Auto-deleveraging is the mechanism of last resort. When a position cannot be closed on the book and the insurance fund cannot absorb the shortfall, the protocol closes profitable positions on the opposite side to make the loss whole. It is the least comfortable mechanism on the venue, and it exists because every alternative is worse. A venue that allows bad debt to accumulate eventually socializes it — spreading losses across every user, including those holding no position at all. Deleveraging instead confines the loss to the specific counterparties of the failed position. That trade is the design: a defined group of profitable traders gives up part of an unrealized gain, so that nobody who was not in that market pays anything.

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When it triggers

Deleveraging is the fourth step in the liquidation sequence, reached only when everything before it fails.
A position past its maintenance requirement
Close against the order book
The liquidation vault takes over
The insurance fund absorbs it
Auto-deleveragingprofitable positions on the other side are closed
Settled
In ordinary conditions the book absorbs a liquidation and none of this runs. Deleveraging becomes reachable when liquidity has genuinely disappeared.
shortfall remains
shortfall remains
shortfall remains
In ordinary conditions the book absorbs a liquidation and none of this runs. Deleveraging becomes reachable when liquidity has genuinely disappeared — a fast move in a thin market, where there is no bid to close into at any price that covers the loss.

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Who gets deleveraged

Selection is by a score computed from public state, so it is reproducible by anyone: score=unrealized profit %×effective leverage\text{score} = \text{unrealized profit \%} \times \text{effective leverage} Positions on the opposite side of the failing position are ranked by this score, highest first. The reasoning behind both factors:
  • Unrealized profit — a trader sitting on a large gain gives up part of a gain rather than taking a loss. Someone barely in profit is affected only after everyone above them.
  • Effective leverage — highly leveraged positions are the ones that made the market fragile. Being first in line is the cost of that.
Nothing here is discretionary. There is no operator decision, no queue that can be bought into or out of, and no way to be selected other than by holding a highly profitable, highly leveraged position on the opposite side of a failure.

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Your ADL indicator

Because the score is computable in advance, your exposure is visible before anything happens. Positions carry an indicator on a five-level scale, refreshed every few seconds: You are notified when you first cross into level 4 or 5, once per crossing rather than repeatedly at the same level. Two ways to move down the ranking: reduce the position, or reduce leverage. Both lower the score, and either can be done at any time.
The indicator only appears on markets where you hold a position, and only when the data behind it is current. If the underlying data is stale, no level is shown rather than a possibly wrong one — a stale ranking is worse than none, because it invites decisions based on a position in the queue you no longer hold.

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The price used

Deleveraged positions close at the bankruptcy price of the failing position — the price at which its margin is exactly exhausted. This choice is deliberate, and the alternatives are all worse: Only the bankruptcy price makes the transfer exact. The profitable trader gives up the portion of their gain that the failing position could not pay for — no more, and no less.

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Execution

Deleveraging is atomic. Closing the failing position and closing the selected counterparties happen in a single execution step: either the whole set applies or none of it does. There is no intermediate state where one side has been closed and the other has not. Everything is on-chain — trigger, ranking, and execution — so any affected trader can verify why they were selected, at what price, and against which failure.
Being deleveraged closes your position at the bankruptcy price, not at market. If you intended to hold that position, you now do not have it, and re-entering costs whatever the market is at that moment. Deleveraging can happen without warning beyond your indicator level, and in exactly the conditions where re-entry is most expensive. See Risk disclosures.

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Where to go next

Liquidations

The sequence that reaches deleveraging only as a last resort.

Leverage

The factor you control that most affects your ranking.

Mark price

How unrealized profit — half the score — is measured.

Risk disclosures

What deleveraging can cost, stated plainly.