Risk Management: Auto-Deleveraging (ADL)

Vanilla Finance: Creating a Secure and Efficient Trading Environment

Vanilla Finance, a pioneering financial trading platform, is dedicated to providing users with a secure and seamless trading experience. Liquidity for Vanilla products is supported by a team of seasoned market makers, whose extensive expertise in derivatives trading ensures users enjoy stable, transparent, and fair liquidity at all times.

In response to extreme market volatility, Vanilla Finance has introduced an Automatic Deleveraging (ADL) mechanism. This innovative measure protects user trading interests, mitigating risks such as liquidity shortages that could prevent profitable settlements. The ADL safeguards user rights through clearly defined execution and settlement rules, ensuring the platform's overall stability and security.

---

Overview of the ADL Mechanism

Automatic Deleveraging (ADL) is a risk management system designed to address extreme market fluctuations or unexpected events. In scenarios where a risk event arises, and the settlement margin is insufficient to cover all user profits, the ADL mechanism is activated. By automatically reducing positions in the most profitable orders, it balances market risks and protects the collective interests of users with open positions.

For every product purchased, Vanilla Finance collects a settlement margin from market makers to guarantee user settlements, reinforcing the platform’s reliability during periods of high market volatility.

---

Trading Recommendations

To minimize the risk of triggering the ADL mechanism, users are advised to diversify their investments across multiple cryptocurrencies or markets. This strategy helps disperse risk and maintain portfolio stability.

---

ADL Execution Process

Once triggered, the ADL mechanism operates as follows:

1. Position Reduction: The system reduces the positions of the highest-ranked profitable orders. No additional fees are charged during this process.

2. Profit Allocation: Profits from the reduced positions are directly transferred to the user’s account balance.

This system ensures that even in volatile markets, user profits are protected while maintaining the overall balance and security of the platform.