Mark Price in USDⓈ-M futures

Last updated 28/05/2023

PreviousDifferences Between a Perpetual Contract and a Traditional Futures Contract NextLiquidation

Last updated 1 year ago

Mark Price in USDⓈ-M futures

Last updated 28/05/2023

Calculation

The calculation of Mark Price is intricately linked to the Funding Rate and vice versa. It is highly recommended to read both sections to get a full picture of how the system works.

As Unrealized PnL is the primary driver of liquidations, and as the Perpetual Contract allows for highly leveraged (up to 125x) positions, it is important to ensure that the Unrealized PnL calculation is accurate to avoid unnecessary liquidations.

The underlying contract for the Perpetual Contract is the ‘true’ value of the Contract, and an average of the prices on the major markets constitutes the “Price Index” which is the primary component of Mark Price.

The Price Index is the primary component of Mark Price. It is the weighted average value of the underlying asset listed on major spot exchanges, which reflects the fair market value of the futures contract and is constantly updated to account for any changes in the asset’s spot price or the weighting of the exchanges used to calculate the index.

At Finandy and Binance, the Price Index for USDⓈ-M Futures contracts derives prices from KuCoin, Huobi, OKX, Bittrex, HitBTC, Gate.io, Ascendex, MXC, Bitfinex, Coinbase, Bitstamp, Kraken, Binance.US, and Bybit.

You can check the real-time on the Binance website.

Additional funds

There are additional protections to avoid poor market performance during outages of Spot Exchanges or during connectivity problems. These protections are listed below:

Single price source deviation: When the latest price of a certain exchange deviates more than 5% from the median price of all price sources, the exchange weight will be set to zero for weighting purposes.
Multi price source deviation: If more than 1 exchange shows greater than 5% deviation, the median price of all price sources will be used as the index value instead of the weighted average.
Exchange Connectivity Problem: If we can’t access the data feed for exchange and this exchange has trades updated in the last 10 seconds, we can take price data from the last result and use it for index calculation.
If one exchange has no updates for 10 seconds, the weight of this exchange will be zero when calculating the weighted average.

*Disclaimer: The numbers in this article are subject to change without further notice.

PreviousDifferences Between a Perpetual Contract and a Traditional Futures Contract NextLiquidation

Last updated 1 year ago

Calculation

The calculation of Mark Price is intricately linked to the Funding Rate and vice versa. It is highly recommended to read both sections to get a full picture of how the system works.

You can check the real-time on the Binance website.

Additional funds

There are additional protections to avoid poor market performance during outages of Spot Exchanges or during connectivity problems. These protections are listed below:

Single price source deviation: When the latest price of a certain exchange deviates more than 5% from the median price of all price sources, the exchange weight will be set to zero for weighting purposes.
Multi price source deviation: If more than 1 exchange shows greater than 5% deviation, the median price of all price sources will be used as the index value instead of the weighted average.
Exchange Connectivity Problem: If we can’t access the data feed for exchange and this exchange has trades updated in the last 10 seconds, we can take price data from the last result and use it for index calculation.
If one exchange has no updates for 10 seconds, the weight of this exchange will be zero when calculating the weighted average.

*Disclaimer: The numbers in this article are subject to change without further notice.