What Is “Auto-Deleveraging” (ADL) and When Is It Used?

Auto-deleveraging (ADL) is a system used by some exchanges as a last resort when the insurance fund is insufficient to cover losses from a liquidated position. It involves closing opposing profitable positions of other traders at the bankruptcy price of the liquidated account.

This is a mechanism to manage systemic risk, and the affected profitable traders are compensated based on a fair price.