Compared to Perpetual Futures prices, the Mark Price better estimates a contract’s ‘true’ value because it is less volatile in the short term. Phemex uses the Mark Price to prevent unnecessary liquidations and discourage market manipulations by bad actors.
One of the components used to help calculate our Mark Price is the Phemex Index price. To view, check out What is the Mark Price and Dual Pricing mechanism?
Phemex BTC indices are sourced from the last traded prices of multiple spot markets. These include:Binance, Coinbase, Okex, Kraken, and Bitfinex. Phemex also obtains its USDT/USD rate from Binance and so on, in order to adjust prices quoted in USDT.
Every time Phemex computes an index, it begins by removing the highest and lowest last traded prices found amongst these 6 exchanges. The final index price is the average value of the remaining last traded prices. The Phemex index engine refreshes and publishes new indices every second.
In addition, Phemex excludes and invalidates sources with broken connections or updates that have stalled for more than 15 seconds. At any given time, the index engine requires at least 3 valid sources to compute an average price. If the number of valid sources drops below 3, the index price will remain unchanged.
How to calculate the Mark Price for perpetual futures contracts?
Mark price = Median* (Price1, Price 2, Contract Price)
**Price 1 = Price Index * (1 + Last Funding Rate * (Time until next Funding / Funding period)
**Price 2 = Price Index + Moving Average (15-minute Basis)
**Moving Average (15-minute Basis) = Moving Average ((Bid1+Ask1)/2- Price Index)
The Moving Average (15-minute Basis) is calculated by taking the average of the bid and ask prices and subtracting the Price Index, before taking the average of that value over the last 15 minutes, calculated every 1 minute.
The Phemex mark price is used to trigger liquidations and to compute unrealized PNL.
The last traded price, on the other hand, counts as the current market price. It will not necessarily be the same as the index price or mark price. Please note that when a user closes a position, the realized PnL will be calculated based on the last traded price, which may differ from the unrealized PnL that was displayed. With such a dual-price mechanism, users must closely monitor the differences between the mark price and the last traded price to avoid unexpected losses.
