Since launched, OKEx’s futures trading has been widely embraced by our institutional and professional traders and miners, making us the leader in the crypto derivatives market. With that said, we have noticed the market demands a more flexible and convenient derivative product. Therefore, as outlined in our futures product development roadmap earlier this year, we officially launched the long-awaited Perpetual Swap today (Dec 3, 2018) during the OKEx NEXTGEN Conference.
What is Perpetual Swap?
Perpetual swap is a more powerful incarnation of the existing futures contract. Similar to the OKEx Futures, you can still long or short a position to profit from / hedge against the rise or decline of a digital asset’s price.
However, unlike futures trading, there is no contract expiry nor the need for roll-over. Instead, you can hold a position without any time limit and withdraw your realized profits anytime. in the meantime, you can also utilize a leverage up to 100x to maximize your trading strategy.
And also introducing: funding
As there is no fixed contract delivery date, a funding mechanism is adopted to ensure the price of perpetual swap is anchored to that in the spot market.
Funding = position value * funding rate
Funding occurs every 24 hours right after the daily settlement at 10:00am CET. A funding fee is only charged/received for open positions, based on the funding rate updated at 09:59am CET each day. When the funding rate is positive, longs pay shorts, and vice versa when it is negative. If you close your position before the daily funding time, you will not pay or receive any funding on the day.
Funding rate = Clamp (MA(((best bid price + best ask price) / 2-spot index price) / spot index price-interest), -0.25%, 0.25%)
Meet the new tiered margin system
Large-scale forced-liquidation and clawback are the last things most users want to see in the market. So, when the trading mechanism needs to take on improvements, the same for our risk management measures. As such, we decided to implement a new Tiered Maintenance Margin Ratio System.
The maintenance margin ratio is the lowest required margin ratio for a user to maintain an open position(s). When the margin ratio of an account is lower than the required maintenance margin ratio, forced liquidation would take place.
Fixed-margin: margin ratio = (fixed margin + UPL) / position value
Cross-margin: margin ratio = (balance + RPL + UPL) / position value
Position value = face value * number of swaps / latest mark price
Partial Liquidation & Full Liquidation
On top of the above-tiered maintenance margin ratio system, partial liquidation is our additional take on reducing the potential market impact if liquidation occurs. Instead of a full liquidation, we will attempt to lower a trader’s tier, increase the maintenance margin ratio and close some of the positions when a trader’s account is breaching the minimum maintenance margin ratio.
E.g. John is holding 30,005 swaps for a position and is placed in tier 3. When his margin ratio is lower than required (2%), the system will take over and reduce the number of swaps open, bringing the position down to tier 1. Number of swaps closing = current no. of swaps — max. no. of swaps of tier 1 = 30,005–19,999 = 10,006 swaps.
When the margin ratio for the open positions is lower than the maintenance margin ratio of tier 1, our system will take over and force-liquidate all the positions at bankruptcy price.
“This marks a key milestone for OKEx. The launch of perpetual swap demonstrates our continuous commitment to building a complete financial ecosystem for blockchain and crypto. With the new offering, investors and traders can select the products which best fit their trading and hedging strategies. However, we would like to remind our users that due to its high-leverage nature, implementing risk control strategies are equally crucial in trading,” said Lennix Lai, OKEx’s Financial Market Director.
A big thank you to all delegates and journalists for supporting OKEx
The OKEx NEXTGEN Conference could not be a success without the support from you. Please enjoy some of the exciting moments in the event.
Risk Warning: Trading digital assets involves significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.
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Source: OKEx Medium