Auto-Deleveraging(ADL)

ADL is TxFlow's final safeguard for platform solvency. It only activates when a user's account value (or isolated position value) becomes negative — meaning the Liquidator Vault cannot cover the shortfall.

When ADL is triggered, traders on the opposite side of the underwater position are ranked and closed against it at the previous mark price. This prevents bad debt from accumulating on the platform.

A strict invariant is maintained: users with no open positions will never bear any platform losses under any circumstances.

ADL priority queue

Traders are ranked by:

1. Highest PnL % — most profitable positions are deleveraged first

2. Highest effective leverage — riskier positions are deleveraged first within the same PnL tier

Backstop liquidated positions receive no special treatment in the ADL queue.

ADL is rare. It only occurs during extreme market events such as flash crashes where the insurance fund is fully exhausted.