📉Auto-Deleveraging

Auto Deleveraging (ADL) is a risk management mechanism used to balance the market when the unrealized profit of positions exceeds a certain threshold compared to the available liquidity pool. This document outlines the process of checking for ADL conditions and executing ADL.

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Checking ADL Conditions

To determine if a market can be subject to ADL, you can call the getPnlFactor function in the MarketUtils library:

solidity

function getPnlFactor(  
    MarketId _id,  
    address _market,  
    address _vault,  
    uint256 _indexPrice,  
    uint256 _collateralPrice,  
    uint256 _collateralBaseUnit,  
    bool _isLong  
) public view returns (int256 pnlFactor);

This function calculates the ratio of unrealized PnL to the pool balance.

Parameters:

• MarketId _id: The ID of the market to check.

• address _market: The address of the market contract.

• address _vault: The address of the vault contract.

• uint256 _indexPrice: The current index price of the asset.

• uint256 _collateralPrice: The current price of the collateral token.

• uint256 _collateralBaseUnit: The base unit of the collateral token.

• bool _isLong: Whether to check long or short positions.

Returns:

• int256 pnlFactor: The ratio of unrealized PnL to pool balance, represented as a signed integer.

Note: The maximum PnL to pool ratio for all markets is 45% or 0.45e18. If pnlFactor > 0.45e18, then an ADL can be executed.

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Finding the Next ADL Target

To determine which position should be targeted next for ADL, use the getNextAdlTarget function in the Position library:

solidity

function getNextAdlTarget(  
    MarketId _id,  
    ITradeStorage tradeStorage,  
    string memory _ticker,  
    uint256 _indexPrice,  
    uint256 _indexBaseUnit,  
    uint256 _totalPoolSizeUsd,  
    bool _isLong  
) external view returns (bytes32 positionKey);

This function calculates the ADL Target Score for each open position and returns the position key with the highest score.

Parameters:

• MarketId _id: The ID of the market to check for ADL targets.

• ITradeStorage tradeStorage: The interface to the trade storage contract.

• string memory _ticker: The ticker symbol of the asset in the market.

• uint256 _indexPrice: The current index price of the asset to 30 decimal places. E.g $2500 = 2.5e33.

• uint256 _indexBaseUnit: The base unit of the index price.

• uint256 _totalPoolSizeUsd: The total size of the liquidity pool in USD to 30 decimal places. e.g 1 USD = 1e30.

• bool _isLong: Whether to check long or short positions.

Returns:

• bytes32 positionKey: The key of the position with the highest ADL Target Score.

Note: This function should not be used on-chain due to its looping nature. It's intended for off-chain use to determine the optimal position for ADL.

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Executing ADL

Executing an ADL is a two-step process:

Step 1: Request Execution Pricing

Before executing ADL, you must first call the requestExecutionPricing function on the Router smart contract:

function requestExecutionPricing(  
    MarketId _id,  
    bytes32 _key,  
    bool _isPositionKey  
) external payable returns (bytes32 priceRequestKey);

Parameters:

• MarketId _id: The ID of the market where the ADL will be executed.

• bytes32 _key: The position key of the position to be deleveraged.

• bool _isPositionKey: Should be set to true for ADL operations.

Step 2: Execute ADL

After requesting the execution pricing and waiting for a price to be signed, you can proceed to execute the ADL by calling the executeAdl function on the PositionManager contract:

solidity

function executeAdl(  
    MarketId _id,  
    bytes32 _requestKey,  
    bytes32 _positionKey  
) external payable;

Parameters:

• MarketId _id: The ID of the market where the ADL is being executed.

• bytes32 _requestKey: The price request key returned from the requestExecutionPricing function.

• bytes32 _positionKey: The position key of the position to be deleveraged.

Important Notes:

Only the person who requested the pricing for an order should be able to initiate the ADL, up until a certain time buffer.

After that time buffer, any user should be able to initiate the ADL.

The caller needs to call Router.requestExecutionPricing before and provide a valid requestKey.

By following these steps and utilizing the provided functions, you can effectively monitor market conditions for ADL scenarios and execute ADL when necessary to maintain market balance.