Hyperliquid Auto-Deleveraging and Trader Ranking
Summary
This document explains auto-deleveraging (ADL) as a last-resort mechanism for keeping a trading platform solvent when an account or isolated position falls below zero. It describes how the platform ranks profitable traders on the opposite side of the position using a score based on mark price relative to entry price and position notional relative to account value. Backstop liquidated positions receive no special treatment in this queue.
When ADL is triggered, selected opposing positions are closed at the previous mark price against the underwater user, preventing the platform from carrying bad debt. The document also states an invariant: users with no open positions do not bear platform losses. It provides no worked examples, parameter details, or discussion of how ADL affects execution outcomes for ranked traders, so it serves as a brief description of the mechanism rather than a full risk analysis.
Key ideas
- ADL is a final safeguard used when an account or isolated position becomes negative.
- Profitable traders on the opposite side are ordered using a score combining price performance and leverage exposure.
- Backstop liquidated positions are handled by the same ADL queue logic.
- Selected positions close at the previous mark price to offset the underwater account.
- The document says users without open positions do not absorb platform losses.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.