What Is the Legal or Contractual Basis for an Exchange to Implement ADL?
The legal and contractual basis for ADL is established in the exchange's Terms of Service (ToS) or User Agreement. By agreeing to trade on the platform, the user explicitly consents to the risk management protocols, including the possibility of Auto-Deleveraging.
This agreement grants the exchange the contractual right to forcibly close a user's profitable position under specific, extreme conditions to maintain market solvency.
Glossar
Contractual Basis
Contract ⎊ The contractual basis defines the legal or technical framework governing a financial agreement, establishing the rights and obligations of all participating parties.
Contractual Right
Entitlement ⎊ A Contractual Right, within the context of financial derivatives, represents a specific, defined privilege granted to one party of an agreement, typically the buyer of an option.
Contractual
Obligation ⎊ Contractual arrangements within cryptocurrency, options trading, and financial derivatives fundamentally establish legally enforceable obligations between parties.