Liquidation - Fair Price Marking

Overview

The trading system at BigONE avoids unnecessary liquidations through the help of the Fair Price Marking mechanism. Without this system, unnecessary liquidations may occur if the market is being manipulated or is illiquid. The system can achieve this by setting the Mark Price of the contract to the Fair Price instead of the Last Price.

For Perpetual Contracts, the Fair Price equals to the underlying Index Price plus a decaying Funding Basis rate, and the Index Price is an average of the latest prices on the major spot exchanges.

All Auto-Deleveraging contracts are subject to Fair Price Marking, and this mechanism only affects the Liquidation Price and Unrealized PNL, so it does not affect Realized PNL.

[Note]
Your Unrealized PNL might be positive or negative immediately after your order is executed. This happens when the Fair Price is slightly different from the Last Price. This is normal and does not mean you have lost money, but be sure to keep an eye on your Liquidation Price to avoid a premature liquidation.

Calculation of Fair Price for Perpetual Contracts

The Fair Price of Perpetual Contract is calculated by the Funding Basis rate:

Funding Basis = Funding Rate * (Time Until Funding / Funding Interval)

Fair Price = Index Price * (1 + Funding Basis)

You can check the funding page for more detailed information on the funding and examples.