What Measures Can an Exchange Take to Minimize the Need for ADL?

Exchanges can minimize ADL by maintaining a well-capitalized insurance fund, which absorbs losses before ADL is triggered. Implementing a robust, multi-tiered margin system with higher requirements for larger positions also helps.

Using a sophisticated, rapid liquidation engine that can close positions efficiently is vital. Furthermore, conservative risk limits and clear trading rules reduce the likelihood of large, unmanageable deficits.