Auto-Deleveraging

Auto-deleveraging (ADL) is a strict mechanism that ensures the platform remains solvent. If a user’s account value or isolated position value becomes negative, users holding positions on the opposite side are ranked based on their unrealized PnL and leverage. Positions liquidated to a backstop pool receive no special treatment in the ADL queue. The specific sorting index to determine the affected users in profit is (mark_price / entry_price) * (notional_position / account_value).

Traders at the top of this queue are deleveraged first: their positions are closed at the previous oracle price against the now underwater user. This mechanism ensures the platform does not accumulate bad debt.

Auto-deleveraging acts as a final solvency safeguard. The system enforces a strict invariant: under all circumstances, any user without open positions will never bear or socialize losses arising from platform insolvency.