Auto-deleveraging (ADL)

Auto-Deleveraging (ADL) is a critical risk management mechanism implemented on Drake to maintain trader net exposure within a controllable threshold, particularly in the context of margin trading. ADL automatically reduces a trader's position when the associated risk level becomes too high, whether due to market volatility or insufficient margin.

How It Works in Drake

On the Drake platform, Auto-Deleveraging (ADL) is triggered to ensure that overall trader exposure remains within manageable limits, thereby protecting the platform’s stability and the dVault insurance fund.

Trigger Condition

Auto-Deleveraging is initiated under specific circumstances:

• Prolonged Imbalance: If there is a prolonged imbalance resulting from large liquidations or potential malicious manipulation, Drake will activate the ADL process. This action aims to free up open position capacity and safeguard the dVault insurance fund.

ADL Process

• Position Ranking: Positions are ranked based on size, with larger positions being prioritized for closure.

• Profit Prioritization: If multiple positions are within the same position side bucket, those with higher profits will be prioritized for closure.

• Order History: If your position is reduced through Auto-Deleveraging (ADL), the action will be recorded in your order history, clearly labeled as "ADL". This allows for full transparency and easy tracking of any adjustments made to your positions due to the ADL process.

Key Benefits

• Risk Reduction: ADL helps reduce the overall risk exposure on the platform, protecting both traders and the platform from extreme market conditions.

• Transparency: Users can track any ADL-related actions in their order history, ensuring full transparency and accountability.