To enhance market liquidity and ensure perpetual contracts better track their underlying spot index prices, a series of optimizations to key trading rules were implemented. These adjustments primarily focus on the price limit mechanism for both futures and perpetual contracts, as well as the funding rate calculations for perpetual swaps.
The goal of these updates is to create a more stable and efficient trading environment, reduce unnecessary market volatility, and protect traders from extreme price conditions.
Price Limit Rule Adjustments
The price limit rule defines the maximum range within which an order can be placed, preventing trades at prices deemed too far from the current index. This mechanism is vital for maintaining orderly markets.
The formula for calculating these limits changes based on how long the contract has been trading.
Price Limit Calculation Formula
| Trading Phase | Upper Price Limit | Lower Price Limit |
|---|---|---|
| First 10 minutes after listing | Index Price × (1 + X) | Index Price × (1 – X) |
| After the first 10 minutes | Min[ Max( Index, Index×(1+Y) + 10-min Premium MA ), Index×(1+Z) ] | Max[ Min( Index, Index×(1–Y) + 10-min Premium MA ), Index×(1–Z) ] |
The key variables in this formula (X, Y, Z) were updated to new values, categorized by contract and coin type.
Updated Values for Futures Contracts
Futures contracts (e.g., weekly, bi-weekly, quarterly) have specific expiry dates. Their new parameters are:
USD-Margined & Coin-Margined Futures
| Contract Type | Coins | X | Y | Z |
|---|---|---|---|---|
| Weekly / Bi-Weekly | All | 5% | 4% | 15% |
| Quarterly / Bi-Quarterly | All | 5% | 6% | 25% |
Note: For weekly contracts, the Z value adjusts to 1% 30 minutes before delivery.
Updated Values for Perpetual Contracts
Perpetual contracts, which have no expiry, are divided into tiers based on the cryptocurrency. Their new parameters are:
Perpetual Swaps
| Tier | Example Coins | X | Y | Z |
|---|---|---|---|---|
| Tier 1 | BTC, ETH, XRP, DOT | 2% | 2% | 5% |
| Tier 2 | ADA, ATOM, DOGE, UNI | 4% | 4% | 8% |
| Tier 3 | FIL, SUSHI, CRV | 6% | 6% | 15% |
Funding Rate Rule Adjustments
The funding rate is a fee paid between long and short traders to ensure the perpetual contract price converges with the spot index price. It is calculated periodically.
Funding Rate Calculation Formula
The formula is:Funding Rate = Clamp[ MA( ( (Best Bid + Best Ask)/2 - Index Price ) / Index Price - Interest ), a, b ]
At the time of the update, the Interest value was 0. The primary change was to the clamping parameters a (floor) and b (ceiling).
Updated Funding Rate Parameters
| Coin | Parameter a (Floor) | Parameter b (Ceiling) |
|---|---|---|
| BTC | -0.375% | 0.375% |
| All Other Coins | -0.75% | 0.75% |
This means the maximum funding rate paid or received for Bitcoin contracts is 0.375%, while for all other cryptocurrencies, it is 0.75%.
👉 Explore more strategies on managing funding rates
Frequently Asked Questions
What is the purpose of a price limit rule?
The price limit rule prevents orders from being placed at excessively high or low prices far from the index value. This protects the market from sudden volatility and potential manipulation, especially in the first few minutes after a new contract is listed.
How does the funding rate help perpetual contracts?
The funding rate mechanism ensures the price of a perpetual contract stays closely pegged to its underlying spot index. When the contract trades at a premium, longs pay shorts a fee, incentivizing selling to push the price down. The inverse is true when trading at a discount.
Why are different coins placed in different tiers?
Coins are tiered based on factors like liquidity, market capitalization, and trading volume. Major coins like BTC and ETH are less volatile and have tighter limits (Tier 1), while newer or smaller-cap assets (Tier 3) require wider bands to accommodate their higher natural volatility.
When did these rule changes take effect?
The adjustments for perpetual contracts' price limits and funding rates were implemented first. The changes for futures contracts' price limits followed shortly after.
Can these parameters change again in the future?
Yes, trading rules are periodically reviewed and optimized to reflect current market conditions and to improve the overall user experience. Any future changes will be communicated through official channels.
Where can I learn more about how these rules affect my trading?
For a deeper understanding of how these mechanics work in practice, it's best to consult educational resources that break down order types and market dynamics. You can view real-time tools and data to see these rules in action on live markets.