1. Introduction to Mark Price and Price Index
The Mark Price is a mechanism used in crypto futures trading on CoinTR to ensure fair and accurate pricing of futures contracts.
The Price index is used to mitigate risks arising from price volatility and market manipulation by providing a more stable reference point. Instead of the asset's last price, the Price Index takes into account the price of the asset across multiple exchanges. You may read more about the differences between Mark Price and the Last Price in this article.
On CoinTR Futures, a contract's Mark Price is determined by considering several factors such as the futures contract's Last Price, the bid1 and ask1 series from the order book, the funding rate, and a composite average of the underlying asset's spot price on major crypto exchanges.
The Price Index is used to calculate the Mark Price and is based on the weighted average spot price of the asset across multiple crypto exchanges.
2. Price Index of USDⓈ-M Futures contracts
What is the USDⓈ-M Futures Price Index?
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 CoinTR, the Price Index for USDⓈ-M Futures contracts derives prices from KuCoin, Huobi, OKX, HitBTC, Gate.io, Ascendex, MXC, Bitfinex, Coinbase, Bitstamp, Kraken, and Bybit.
How to calculate the Price Index for perpetual futures contracts?
Price Index = Sum of (Weight Percent of Exchange A * The Symbol’s Spot Price on Exchange A + Weight Percent of Exchange B * The Symbol’s Spot Price on Exchange B +...+ Weight Percent of Exchange N * The Symbol’s Spot Price on Exchange N)
Weight Percent of Exchange i = Weight of Exchange i / Total Weight
Total Weight = Sum of (Weight of Exchange A + Weight of Exchange B + ...+ Weight of Exchange N)
Please note that in the event of extreme price volatility or deviation from the Price Index, CoinTR will undertake additional protective measures, including but not limited to changing the constituents of the Price Index.
CoinTR also undertakes additional protections to avoid poor market performance during Spot exchange outages or connectivity issues:
The “Last Price Protected” mechanism: When CoinTR cannot obtain a stable and reliable source of reference data for the Price Index and the Mark Price, the Price Index will not be updated for contracts that use a single source of the Price Index. CoinTR will use the “Last Price Protected" mechanism to update the Mark Price until it is back to normal. This mechanism temporarily switches the matching system to the latest transaction price of the contract within a certain limit as a reference for the Mark Price to calculate unrealized profit and loss and liquidation call level to avoid unnecessary liquidation.
3. Mark Price of USDⓈ-M Futures contracts
Compared to Perpetual Futures prices, the Mark Price better estimates a contract’s ‘true’ value as it is less volatile in the short term. CoinTR uses the Mark Price to prevent unnecessary liquidations and discourage market manipulations by bad actors.
On CoinTR Futures, the Mark Price of a contract is calculated by taking into account several factors. These include the Last Price of the futures contract, the bid1 and ask1 series from the order book, the funding rate, and a composite average of the underlying asset's spot price on major crypto exchanges.
How to calculate the Mark Price for perpetual futures contracts?
Mark price=Index*(1+Funding fee)