# Auto-Deleveraging

Auto-deleveraging (ADL) is a backstop process used when a liquidator becomes insolvent before closing positions assumed during liquidation.

## Execution

When ADL is triggered, the exchange:

1. Cancels the liquidator's open orders.
2. Identifies positions on the opposite side of its remaining exposure.
3. Reduces those positions until the residual exposure is closed.
4. Submits the resulting state changes onchain.

The smart contracts verify that each reduction offsets the liquidator's exposure and that the resulting balances and positions are internally consistent before settlement.

## Position Impact

ADL executes outside the order book and may reduce part or all of an opposing position without a new order from its holder. Once settled, the updated position and balance are reflected in the account state and exchange events.