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What Is the Immediate Market Impact When an Exchange Activates Its ADL System?

A sudden reduction in open interest, temporary price instability, and a negative signal about market stress.
Greeks.Live22.11.25

What Is the Immediate Market Impact When an Exchange Activates Its ADL System?

The immediate market impact of ADL activation is a sudden, sharp reduction in open interest for the contract being affected. It can also lead to temporary market instability and price fluctuations as profitable positions are forcibly closed.

Most significantly, it sends a strong negative signal to traders about the extreme stress the exchange's risk management system is under, which can lead to a temporary drop in trading volume.

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