Estimated Leverage Ratio (ELR) is defined as the ratio of open interest divided by the reserve of an exchange.

$\text{Estimated Leverage Ratio} = \frac{\text{Open Interest}}{\text{Amount of Reserve}}$

ELR for a derivative exchange tells us how much leverage is used by users on average. This information measures traders' sentiment whether they take a high risk or low risk. If ELR value is high compared to the last couple of days, it indicates traders are quite confident in their positions. Funding data such as funding rates may help traders to build a robust trading strategy with this information.

In addition, ELR can estimate the exchange's transparency indicating exchange risk itself.