Auto-deleveraging (ADL) is the last line of defense employed by the risk engine to protect the solvency of markets. It kicks in when a position cannot be closed above the bankruptcy price and the insurance fund is insufficient to cover the capital shortfall. On Bluefin, a permissioned ADL worker automatically deleverages bankrupt positions against top-of-queue positions from the opposite side. The ADL queue prioritizes closing the most profitable and high-leverage traders to reduce counterparty risk.

ADL Queue

The objective of the ADL queue is to pick out accounts with the highest PnL percentage and leverage. For each market, ii be the individual position for which the ADL Score is calculated.

PNL Scorei={Pindex/oraclePposPposif Long, (Pindex/oraclePpos)Pposif Short.\text{PNL Score}_i = \begin{cases} \frac{ P_{index/oracle}-P_{pos} }{P_{pos}} \quad &\text{if Long}, \\\ \frac{-( P_{index/oracle}-P_{pos}) }{P_{pos}} \quad &\text{if Short}.\end{cases}

PNL Scorei=max(0,PNL Scorei)\text{PNL Score}_i = \max (0, \text{PNL Score}_i)

Leverage Scorei=1/max(MMR,MR)\text{Leverage Score}_i = 1/\text{max}(\text{MMR},\text{MR})

ADL Scorei=PNL Scorei×Leverage Scorei\text{ADL Score}_i = \text{PNL Score}_i \times \text{Leverage Score}_i

ADL Quantile=rank(user.ADL Scorei)/Total User Count\text{ADL Quantile} = rank(user.\text{ADL Score}_i)/\text{Total User Count}

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