Hi,
That is the scope of the levels system but you have to define the levels. You can't set the system to generate commissions for all the levels of an affiliate.
If you define 3 levels and user A referred user B, user B referred user C, user C referred level D, user D referred used E, when E buys something, commissions will be generated for D, C and B ( first 3 levels ). User A will not get a commission.
So the system can't actually generate a MLM system ( which is illegal in a lot of countries ), but it's up to you how many levels you define.