1. What is Auto-Deleveraging (ADL)?

Auto-Deleveraging (ADL) is a risk management mechanism designed to protect BTCC's risk reserves. When BTCC's risk reserve (for specific products) can no longer absorb further losses arising from the liquidation of a losing position, ADL is triggered to limit the further loss to the risk reserve. Essentially, losing positions are matched with opposite profitable or high-leverage positions (referred to as "deleveraged positions"), and the two positions offset each other and are liquidated, eliminating the additional risk posed by the losing position to BTCC's risk reserve. It is important to note that due to ADL, profitable positions may be liquidated, limiting their future profit potential.

BTCC maintains multiple risk reserves. Each product line may have one or more applicable risk reserves ("applicable risk reserves"). More detailed information on the available risk reserves, including their current and historical values, is available via this link.

 

The risk of ADL is related to the status and value of each applicable risk reserve (not the overall risk reserve value of BTCC), as described in this document.
ADL mechanism is applied only to Contract Pro business.

 

2. When is ADL Triggered?

ADL is intended to be a last-resort risk management mechanism. Therefore, ADL is not frequently triggered. When losing positions can be safely absorbed by the market or, when appropriate, by the applicable risk reserve, BTCC will take steps to reduce the likelihood of ADL. ADL is triggered when such absorption leads to excessive risk.

ADL will be triggered in the following scenarios:

1. When the balance of the applicable risk reserve is below 5,000 USDT.
   
   
2. When the applicable risk reserve is insufficient to cover the liquidation loss of a particular order.
   
   

3. What Happens After ADL is Triggered?

Under normal circumstances, without ADL, losing positions are liquidated and closed by placing these positions into the order book, with the goal of allowing opposite position orders in the market to absorb the losing position. This results in realizing the losses of the losing position, and the opposite position orders in the market will be filled.

However, when ADL is triggered, the losing position is liquidated and closed by matching it with an opposite profitable or high-leverage position (the "deleveraged position", which may belong to other users, not the user responsible for the losing position), i.e., the position is deleveraged, without placing the losing position into the order book. Regardless of whether the opposite deleveraged position has unfilled orders, the deleveraged position will be forcibly liquidated at the market price at the time of matching. Once the losing position is matched with the opposite deleveraged position, the two positions offset each other and are closed. This eliminates the loss of the losing position and realizes the profit of the deleveraged position. If the user does not place new orders in the order book, the deleveraged position cannot gain any further profit. A key risk is that the new entry price for any new orders may differ from the deleveraged position.

 

For isolated-position mode, the profit is calculated by dividing the position's rate of return by the position's margin rate (which considers the leverage used by the position). Losses are calculated by multiplying the position's rate of return (which will be negative) by the position's margin rate. For spot and contract modes, multi-asset modes, and composite modes, the formula uses the user's account margin rate instead of the position's margin rate. The higher the numerical value of the calculated result, the higher the position's ranking in ADL.

 

4. How Can I Predict When ADL Will Occur?

ADL is most likely to occur in highly volatile markets. Therefore, it is inherently unpredictable. BTCC will take measures to limit the occurrence of ADL.

ADL is based on several factors related to the position, including the position's profit and loss levels and the leverage used. Based on these factors, each position is ranked. According to this ranking, the risk of ADL for each position on the BTCC platform is displayed using a warning signal light system (the following example shows the case where all five lights are lit):

All 5 lights lit mean the position faces the highest risk of auto-deleveraging, while 1 light lit indicates lower risk. Despite this warning system, even positions with lower risk may face auto-deleveraging in a highly volatile market.

 

Changes in the applicable risk reserve amount and updates on the website may have a time lag, and ADL may suddenly occur even without any previous major fluctuations.

 

No warnings will be issued prior to the occurrence of ADL, except for the scenarios mentioned above. After ADL occurs, an email notification will be sent to the affected user, detailing the relevant closed positions.

 

Can I Prevent My Position from Being Affected by ADL?
BTCC's risk management engine selects which positions will be subject to ADL based on multiple factors, including the position's profit and loss levels and the leverage used. While it is impossible to eliminate the possibility of ADL being triggered, reducing leverage will decrease the likelihood of your position being affected by ADL.

Are There Transaction Fees for ADL?
No transaction fees are charged for the deleveraged positions. The liquidation fee is charged for the losing positions.