Index Price
The Index Price is determined by Spot prices from major exchanges. For Example, BTC Index is the volume-weighted average price of BTC in 6 exchanges including Huobi, Okex, Binance, Kucoin, Poloniex, and HitBTC. The weight will be rebalanced quarterly.
Below are additional protections to avoid poor market performance during outages of exchanges:
Data Retrieval:
|
No. of valid exchanges |
Situation |
Solution |
|
＞=3 |
If the price of exchange A deviates more than ±1% from the Median price of other exchanges (including exchange A). |
Price of exchange A will be calculated as ±1% of the Median price of other exchanges. |
|
2 |
If the price difference between 2 exchanges is greater than 1%. |
Price of the exchange with a smaller deviation is considered normal, while the other exchange is considered as Fat Finger index. And the Index Price is temporarily anchored at the normal price. |
|
1 |
If the price difference between the latest one and previous one is greater than 1% |
It is considered as Fat Finger index and the previous price is adpoted. |
Data Loss:
If the data from an exchange is not retrievable for a certain period (due to exchange closed or attacked, market suspended...), the last valid price will be used.
If the data from an exchange in the previous 300 data points (5 min) is less than 10%, the price of this exchange will be excluded, and the weight of this exchange will be temporarily adjusted to 0. When the data of this exchange recovers, and at least 90% data are valid out of 300 data points, the weight of this exchange will be recovered.
If all the data for Index Price are invalid and got excluded, or no valid data is available due to certain reasons, the last valid index will be used until a new valid Index Price is obtained.
Traders could check the Index composition and historical data at Contract Specifications.
Index Price is considered as fair spot price and is used to calculate Mark Price.
Mark Price
In traditional Futures, a position value is usually marked to the last trading price. However, unnecessary liquidation might occur if the market is manipulated or illiquid, and the Mark Price swings significantly from its Index Price.
Poloniex utilizes Fair Price Marking to prevent such situations from happening, instead of the last trading price.
Mark Price = Index Price * (1 + Funding Rate basis rate)
Funding Rate basis rate = current Funding Rate * (current time interval from the current funding period / funding cycle)
Mark Price is used to calculate the unrealized P&L and affects liquidation, while it doesn’t affect realized P&L. Realized P&L is determined by the close price.
When Index Price behaves abnormally, the marking method will be changed accordingly. A new marked price is calculated based on the depth-weighted bid price and ask price in the order book by a reasonable algorithm.