Overview of BitMEX's Auto-Deleveraging System
In BitMEX futures trading, when investors incur losses exceeding their margin, BitMEX faces potential financial risk. To mitigate this, the platform employs an Auto-Deleveraging (ADL) mechanism to close positions and distribute losses among opposing traders.
How ADL Works
Trigger Conditions:
- When a position is liquidated but cannot be closed at the market price.
- The mark price reaches the bankruptcy price (the price at which the position's equity is zero).
Process:
- Liquidated positions are transferred to BitMEX’s liquidation engine.
- ADL selectively closes opposing positions (e.g., longs for a short liquidation) based on profitability and leverage.
Priority Ranking:
- Traders with higher profitability and leverage are deleveraged first.
- A visual indicator (0–100%) shows a trader’s ADL priority.
ADL Ranking Formula
Priority is determined by:
- If Profitable:
Rank = Profit Percentage × Effective Leverage - If Losing:
Rank = Profit Percentage / Effective Leverage
Key Metrics:
- Effective Leverage =
|Mark Value| / (Mark Value – Bankruptcy Value) - Profit Percentage =
(Mark Value – Avg Entry Value) / |Avg Entry Value|
Positions are ranked separately for longs and shorts.
Example Scenario
Suppose 6 long positions exist with calculated ranks:
| Account | Effective Leverage | PnL Rank | ADL Priority |
|---------|---------------------|----------|--------------|
| 2 | 15x | 90% | Highest |
| 5 | 10x | 70% | Medium |
A liquidated short (20 contracts @ $650 bankruptcy price):
- Account 2: 10 contracts closed via ADL.
- Account 5: Remaining 10 contracts liquidated.
Both users are notified and may re-enter the market.
FAQs
1. What triggers ADL?
ADL activates when liquidations cannot be filled at market prices and the mark price hits bankruptcy.
2. How can I avoid ADL?
- Maintain lower leverage.
- Monitor your ADL priority indicator.
3. Is ADL predictable?
No, but the ranking system ensures transparency.
👉 Learn more about BitMEX’s risk management
Key Takeaways
- ADL protects BitMEX from systemic losses.
- Priority depends on profitability and leverage.
- Traders are notified post-ADL for re-entry.
BitMEX’s shift from socialized loss to ADL reduces uncertainty for traders.