- Protected liquidation — reduce-only IOC limit orders, limited at the position’s protected rung: three quarters of the way from its pinned price back toward solvency. Protects execution quality while the bucket still has price protection to spend.
- Terminal liquidation — once the bucket falls below three quarters of its maintenance margin, reduce-only attempts for the full remaining position, limited at the pinned price or unlimited depending on the venue’s liquidation mode. Protects solvency: the bucket is going to be closed either way, so the only question left is where.
- Auto-deleveraging — whatever the book would not take, closed against traders holding the opposite side, at the pinned price.
What Monaco does differently
Some exchanges rank traders by profitability and leverage, then close the single highest-ranked account first. That concentrates the entire cost of an event on one trader — usually the one who was most right about the market. Monaco does not rank by profitability. It asks, for every trader on the opposite side, where the fill would leave them — counting only the collateral they could not withdraw anyway — and reaches everyone it leaves covered before anyone it would push past zero. That first group is filled pro-rata by position size, so the cost spreads across the market in proportion to exposure rather than landing on one account. Being the most profitable trader in a market never makes you first; being the one with nothing behind the position does.When ADL triggers
A risk bucket is auto-deleveraged when all three of the following hold:- Auto-deleveraging is enabled for the venue.
- The bucket is below three quarters of its maintenance margin, so it has no price protection left to spend.
- The book refused the position on this attempt.
Why not bankruptcy
The obvious rule — deleverage once equity hits zero — measures the wrong thing, and it is worth being explicit about why, because most venues use it. Equity is computed at the mark. When the book will not trade, the mark is a price nobody is honouring, so “solvent at the mark” describes a sale that cannot happen, and “bankrupt at the mark” describes a loss nobody has agreed to take. A bucket deep past its own bankruptcy price over a book that is filling happily does not need deleveraging — it is being liquidated, which is the system working. A bucket that is still technically solvent over a book that will not touch it does, because nothing else will close it. So Monaco deleverages the position the book refused, whether or not it is bankrupt. ADL can therefore reach a solvent bucket — and when it does, the counterparty is paid for the fill rather than charged, because a solvent bucket’s pinned price sits on the profitable side of the mark for whoever takes the other side of it.How much the venue will pay before handing over
The book “refusing” a position means refusing it at a price, and the venue’s liquidation mode sets that price. There are two modes:
When the insurance fund is empty the venue switches to Zero automatically and stays there until it is switched back once the fund is replenished: a fund with nothing left cannot pay for fills past the pinned price, so deleveraging takes over instead.
There is no minimum event size
Monaco does not impose a floor below which ADL cannot happen. A small refused position is deleveraged like a large one. A floor would let small holes accumulate as uncovered bad debt with no mechanism to clear them; Monaco would rather deleverage a small position than quietly socialize an unbounded number of small losses.The pinned price
The pinned price is where the position’s remaining collateral is exactly consumed — the price at which the bucket’s equity reaches zero. It is derived from the position’s entry and the collateral behind it, not from the mark. It is fixed once, when the bucket enters liquidation, and does not move again. That is worth stating carefully, because it is the property everything else rests on:- Every step along the way is priced against the same number: the protected slices’ limits, the terminal attempt’s limit in the Zero mode, and every ADL chunk’s fill price. The price does not drift as the position is worked down, so a counterparty reached in the last chunk gets the price a counterparty reached in the first one got.
- The mark may travel arbitrarily far in the meantime and the pinned price does not follow it. This is not an approximation: the price is derived from entry and collateral, quantities the mark does not enter, so re-deriving it after a mark move returns the same answer. Pinning it simply removes the chance to re-derive it from state that has since changed.
Cross-margin buckets
A cross-margin bucket holds positions in several markets against one pool of collateral, so it has no single closing price — there are many combinations of prices at which its equity would be zero. Monaco picks the one that moves every market the same fraction of its own mark, in the direction that recovers the bucket’s shortfall, scaled by how much margin each market requires. So each market absorbs the shortfall in proportion to the risk it was carrying, not to how many units of it you happened to hold — two positions of equal size and equal risk contribute equally whether the asset trades at 50,000. That includes markets where the bucket was in profit: the bucket’s collateral and the profit realized on its winning legs flow out through its losing legs, and what neither covers is shared across every counterparty. One market is closed per episode; each follow-on episode re-prices what remains from fresh state and reaches the same result.Who is selected, and at what price
The pool is every risk bucket holding the opposite side of the refused position in that market — isolated and cross alike. Only the risk bucket being liquidated is excluded, along with buckets already frozen in bad debt. The same margin account’s other risk buckets are ordinary counterparties: if you are long in a cross bucket and short the same market in an isolated one, your own hedge can take the fill, with nothing leaving your account. An account that is itself being liquidated is eligible. When two accounts on opposite sides of the same market are both failing, closing them against each other is the only disposal that touches nobody solvent — and excluding them would leave both stuck, since neither could reach the other. Every counterparty in an episode fills at the same pinned price, and nothing is capped: once you are selected for a quantity, you fill that quantity at that price. What differs is who is reached first. The cost of a fill is the same for everyone: the gap between the pinned price and the mark, per unit. That gap can be negative — when the liquidating bucket is still solvent its pinned price sits on the profitable side of the mark, and the fill pays you. Your entry only decides which pocket a cost comes from: a trader who entered beyond the pinned price gives up unrealized profit they had not banked; a trader who entered inside it pays from posted collateral. That gap can matter more than it looks for a cross-margin account: a leg’s unrealized profit may be what is carrying a losing position in another market, so a fill that “pays” you can still leave your whole account short. Monaco therefore selects by where the fill leaves your whole account, in two stages, exhausting the first before touching the second. What counts as “your account” here is deliberately conservative. Monaco does not assume you will still be holding the collateral you hold right now — you are free to withdraw it, and the plan is made before the fill lands. It counts only what you could not take out if you tried: your initial margin, plus any unrealized gain across your positions, since the withdrawal gate never lets an unrealized gain fund a withdrawal. Collateral above that is yours to move and is not counted in your favour. Nor is margin you no longer have: if a position moved against you, what you actually hold is what counts.1. Traders the fill leaves covered
Everyone whose account would still be at or above zero on those reserves after closing the whole position at the pinned price. This group is filled pro-rata by position size, with no cap — being in it already means the whole position fits — so the cost spreads across the market in proportion to exposure. As long as this group can absorb the refused position, nobody else is touched at all. A fill here can still leave your account under its maintenance requirement, in which case it enters the ordinary liquidation flow afterwards with equity still to liquidate. Selection protects your solvency, not your margin ratio. Being in profit is not what puts you in this group, and being at a loss is not what keeps you out. A loss your own initial margin covers is what that margin was posted for. Monaco does not rank counterparties by how profitable they are.2. Traders the fill leaves past zero
Reached only when the first stage has no position left to give. These accounts become bankrupt themselves, and the same machinery that reached them runs for them: their remaining positions close at their own pinned price against their own markets’ opposite sides. The loss travels until it lands on accounts that can carry it. This stage closes a position in full rather than splitting it, and reaches the account it would leave closest to zero first. A partial close here would leave the loss sitting on a live position that has to be dealt with again later; closing it out settles it at a price already known.What reaches the fund, stated plainly
The liquidated trader lands on exactly zero, always — the pinned price is by construction the price at which its equity reaches zero. A counterparty pushed past zero with positions still open carries the loss onward through its own episode. The only thing an episode charges to the insurance fund is a counterparty left flat and negative — no position left to carry the loss with — and it is charged by exactly that shortfall, recorded on the fill. Monaco meters it per episode, so an episode that consumed the fund is never indistinguishable from one that did not. Because perpetual bookkeeping is zero-sum, the opposite side always holds enough quantity to close the refused position in full. Every episode closes the position completely, with no human in the loop.Slice sizes
ADL has no minimum slice size. A market fragmented into many small holdings must still be closeable, so no holding is too small to be reached. Partial slices are sized on the market’s lot step. Lots are allocated by largest remainder, and never to a holder outside the group currently being reached. A counterparty whose position is closed in full is closed at its exact size, on the lot step or not. The last part of the position being closed is always placed, even when it is smaller than one lot, so ADL never strands a sub-lot remainder.An ADL fill can leave your position off the lot step
The position being closed may itself be off the market’s lot step. When the last counterparty reached takes only part of its position, that remainder lands on them. For example, a holder of 10 on a step of 1 who absorbs the final 0.5 is left holding 9.5, a size an ordinary order on that market cannot trade down to. You can always close it. A reduce-only order for exactly your full position size is accepted even when that size is off the lot step or below the minimum order size. A TP/SL set to close the position sizes itself to the live position in the same way. Only a partial reduce-only order has to sit on the lot step.Your orders after an ADL fill
When ADL closes your position in full, your resting reduce-only orders on that market in that risk bucket are cancelled with it — there is no position left for them to reduce, and leaving them would let them fill against a position you open later. They endCANCELLED with the terminal reason AUTO_DELEVERAGING, not LIQUIDATION: you were deleveraged as a counterparty, not liquidated. Your other resting orders stay on the book. A risk bucket the fill left under its maintenance margin enters the ordinary liquidation flow, which cancels its resting orders as liquidation always does.
Episodes, and why you are told afterward
An ADL event is an episode. The pool, the price, and every slice are fixed at the moment the episode opens. Execution then proceeds in chunks that carry out that fixed plan — they never recompute it. Episodes run one at a time per bucket; a bucket with an episode already open is never re-planned underneath it. If a selected counterparty’s position has shrunk below their planned slice by the time their chunk executes, their slice is clamped to whatever they actually still hold. Nobody is ever over-closed, and the shortfall is not redistributed onto the other counterparties in the plan — it rolls into a follow-on episode that re-plans against fresh state. The price never changes: every fill is at the pinned price, which was fixed before the episode even opened, and where that leaves each counterparty is re-checked from their account as it stands at that moment. Every chunk re-checks that the bucket is still below three quarters of its maintenance margin. A bucket carried back above that line between open and chunk — by a mark rebound, a funding payment, a deposit — is handed back to the ordinary liquidation step rather than closed against counterparties it no longer needs. Only something external can carry it back. The episode’s own fills cannot: closing part of a position at its pinned price leaves the bucket exactly as far from that line as it was before, in proportion. So an ADL chain never accelerates itself into deleveraging more than it had to, and never stalls itself part-way through either. Notifications fire when an episode closes, not when it opens. This is intentional: Monaco does not announce the list of who is about to be closed before executing it. Be clear about what that does and does not mean. It is not a guarantee that an in-flight episode is unobservable. A counterparty filled in an early chunk sees that fill in their own position and balance straight away, well before the episode closes. And ADL fills print as trades — they appear on the public trades endpoint and are folded into candles, volume and last-price like any other trade. Anyone watching the tape can see an episode in progress.Known gaps
Recorded here rather than discovered later:- Statements do not yet label ADL fills. An ADL fill appears as an ordinary fill.
- Charts and share cards are not yet ADL-aware.
- Public trade data does not label ADL fills either. To an outside observer they are indistinguishable from ordinary trades — visible, but not interpretable.
Summary
- ADL is tier 3, and runs when the book refuses a position that is below three quarters of its maintenance margin — not when the bucket is bankrupt. A solvent bucket the book will not take is deleveraged; a bankrupt one the book is filling is not. No minimum size.
- Every fill is at the position’s pinned price, derived from entry and collateral and fixed when liquidation began, never the mark. A cross-margin bucket moves every market the same fraction of its mark, weighted by the margin that market requires.
- How far past that price the venue will pay the book before handing over is the venue’s liquidation mode: Unbounded by default, and Zero — where the fund is never charged for execution — once the insurance fund is empty.
- Counterparties are reached by where the fill leaves their whole account: everyone it leaves at or above zero first, pro-rata by size; then, only if needed, those it pushes past zero, closest to zero first and closed in full. Nothing is capped once selected. Your own other risk buckets are eligible counterparties; only the liquidated bucket is excluded.
- A counterparty pushed past zero carries the loss on through its own episode; only one left flat and negative reaches the insurance fund, by a recorded shortfall.
- Plans are fixed at episode open; nobody is over-closed; a bucket carried back above three quarters of maintenance by anything external is handed back to the book; you are notified at close, though the fills themselves print publicly as they happen.