How Does the Exchange Attempt to Minimize the Market Impact of ADL? ▴ Learn

How Does the Exchange Attempt to Minimize the Market Impact of ADL?

Exchanges minimize the market impact of ADL by using the Mark Price for the closure, rather than executing the deleveraging order directly on the order book. This prevents the ADL closure from moving the market price further.

Additionally, the ADL system is only activated as a last resort and is designed to be as swift and targeted as possible, closing only the necessary portion of the highest-risk profitable positions.

What Is the Role of an Order Book in Preventing or Facilitating Front-Running on a Centralized Exchange (CEX)?

How Does the Concept of an Order Book Relate to the Impact of a Whale’s Large Sell Order?

Define ‘Iceberg Order’ and Its Impact on Perceived Order Book Depth

Does ADL Affect the Mark Price or the Index Price?