Dear WEEXers,
https://weexsupport.zendesk.com/hc/en-us/articles/5500518124057--Auto-deleveraging-ADL
How does it work?
Auto-Deleveraging short as ADL, refers to a forced liquidation process implemented when extreme market conditions or uncontrollable factors cause the platform's risk reserves to become insufficient or decline rapidly. This mechanism is used to control overall platform risk by forcibly closing counterpart positions. Unlike the profit-sharing mechanism, which affects all profitable users' trading experience, the ADL mechanism only impacts a portion of profitable users.
Counterparty liquidation only occurs when the risk protection fund is unable to take over the positions of users who have been liquidated. WEEX strives to minimize the impact of such liquidations, using methods like Fill and Kill to reduce the shock caused by counterparty liquidations. However, due to the high volatility of the cryptocurrency market and the high leverage used in futures market, these situations may still occur. To provide the best user experience, we make every effort to reduce the possibility of this happening.
[Close positions by ADL]
When a user's positions are forced liquidated, the remaining positions will be taken over by the platform's liquidation system.
If the forced liquidation position cannot be closed in the market, and when the mark price reaches the bankruptcy price.
[Close positions by ADL]
The system will liquidate investors' positions in the opposite direction by ADL. The ADL closing will be applied to investor who has the position in the opposite direction.
It is a situation that occurs with minimal probability. This is a standard setting, and exchanges such as Binance and Huobi also have a similar agreement-based liquidation (ADL). For more details, please refer to Agreement-Based Liquidation (ADL):
Refer to the relevant instructions of Binance and Huobi
Huobi
https://www.huobi.com/support/en-us/detail/44916845038351
Binance
https://www.binance.com/en/support/faq/what-is-auto-deleveraging-adl-and-how-does-it-work-360033525471
OKX
https://www.okx.com/support/hc/en-us/articles/360054418331
-