Out of Scope:

  • API Documentation

  • Differentiation between testnet and production

Overview

EQONEX BTC Perpetual futures (“Perpetual Futures”) are denominated in the USD Coin stablecoin (USDC) and non-inverse in that the price of the futures increases as the price of BTC increases against USDC. Perpetual Futures traded on EQONEX have several key features which are explained in detail below.

While most exchanges use an index to calculate mark price, EQONEX uses its own market to mark its Perpetual Futures, as elaborated below [insert link]. To mitigate the risk of cascading stops during high volatility events, EQONEX will also use an index as a bound for the Mark Price, as elaborated below [insert link]. Initially this bound will be relatively tight, but as liquidity on the platform grows, we intend to loosen this bound.

Users will be able to trade perpetuals on margin and EQONEX will provide up to 125x leverage. To mitigate against the risks associated with margin trading, the total notional amount tradable is limited by the leverage table detailed below [Link]. As liquidity grows, we will review the notional amounts linked to leverage levels. The Margin Liquidation Trigger is set to 50% of the Initial Margin required for open positions.

The Basis (funding) is an exchange of payments between long position holders and short position holders of the Perpetual Futures. The Basis Payment will be calculated as an 8-hour TWAP of the difference between the EQONEX Spot and Perpetual Futures traded price. As the Basis calculation is based on EQONEX traded prices rather than on an index of prices from different exchanges, traders can, for hedging purposes, replicate the basis calculation using only the EQONEX spot and perpetuals market. The basis is calculated and settled in USDC every eight hours.

We believe that the EQONEX liquidation process is unique when compared to other trading venues. If a client's Total Account Margin falls below the value required to keep the position open, EQONEX will endeavor to close the position at or above the Zero Price (defined below)[insert link] (commonly known as the bankruptcy price), the price at which the client has lost all its Total Account Margin. This is done using our designated Liquidation Platform. EQONEX will invite participants, including market makers to participate in the Liquidation Platform. In addition, our Liquidation Reserve may quote prices solely for the purpose of taking on those positions.

It is important to note that we do not have an internal market maker. Hence, our Liquidation Reserve has no informational advantage and no additional view on orders/stops/sizes. Its purpose is only to manage the risk of liquidated positions as efficiently as possible.

The Liquidation Platform may best be considered as a post-only dark pool in which the only takers are liquidation orders. Open orders on the Liquidation Platform cannot be seen by exchange participants nor those invited to participate on the said platform. The Liquidation Platform should allow positions to be liquidated at relatively more competitive prices, at or above the Zero Price. The use of the Liquidation Platform also enables participants to reflect liquidity from other exchanges as participants are skilled at cross-exchange trading.

The risk of ADL can never be fully removed from the exchange. If the liquidation order cannot be (fully) filled on the Liquidation Platform, the order will pass to the public order book. If there is no sufficient capacity in the public order book to absorb the order at or above the Zero Price, the remaining position will be transferred to our Liquidation Reserve at the Zero Price. The exchange will only enter ADL if the Liquidation Reserve is depleted to the point that no further risk can be absorbed.

Marking

Most crypto exchanges calculate a Mark Price based on an index of spot exchanges; this naturally makes it harder to hedge as one has to, theoretically, buy/sell spot from different venues. On EQONEX the Mark Price is a function of our own markets. We want to set the precedent that traders should be able to hedge the product as well as replicate the funding calculation when trading futures on our exchange.

  • Market Price: the last traded price.

  • Spot Mark Price: the Market Price or, if not available, the Exchange Index.

  • Perpetual Futures Mark Price: the 3 second TWAP of the Market Price bound to the Exchange Index +/- 0.2%. If the Market Price is not available, Exchange Index + Basis at last basis calculation.

  • The TWAP is based on the average of the open, high, low and close of each 1 second bar.

On EQONEX the Exchange Index serves as a bound for the Perpetual Futures Mark Price, such that where Perpetual Futures prices diverge too far from the Exchange Index, the Perpetual Futures Mark Price is set to the Exchange Index +/- the spread.

The current bounds are set at +/- 0.2%. Therefore, the maximum deviation from the Exchange Index is capped at either 0.2% above or 0.2% below the Exchange Index. For example, if the Market Price of the Perpetual Futures was 10,050 and the Exchange Index was 10,000, then the Perpetual Futures Mark Price would be 10,020. If the Market Price was 9,990 then the Perpetual Futures Mark Price would be 9,990, as this is less than 0.2% below the Exchange Index.

Exchange Index: simple average of the spot price of the following pairs on the following exchanges, all converted into USD at such rate as EQONEX shall determine. Any prices older than 100 milliseconds (ms) are removed.

  • Binance BTC/USDT

  • Kraken XBT/USD

  • Coinbase BTC/USD

  • Gemini BTC/USD

  • Bitstamp BTC/USDC

Prices are fetched every 100ms. Any prices older than 100ms are removed. If no exchange has updated their price in the last 100ms then the previous index price will be used.

The price for USD vs USDT is taken from Kraken with no time limit, the price for USD vs USDC is set at 1.

Leverage/Margin

On EQONEX, participants have the option to trade with leverage for certain products, including Perpetual Futures. This means that each dollar of notional exposure can be funded with a smaller amount of capital.

Leverage

Leverage: the ratio between the Total Account Margin and the notional exposure of a portfolio.

Account Leverage = abs(Total Notional Position) / Total Account Margin

The amount of leverage available depends on the position size - to open a larger sized position requires a relatively larger amount of capital than to open a smaller sized position. The amount of capital required to open any position is also referred to as Initial Margin. A trader may choose to reduce their leverage at any time by increasing the balance in their account.

Initial Margin

Initial Margin: the minimum amount of USDC required to open any new position.

The Initial Margin applies to both open position(s) and open order(s) for leveraged products. The part of the Initial Margin applicable to open orders is called Reserved Margin. When an Account's margin level, the Total Account Margin, falls below the Initial Margin requirement, no new orders can be sent unless such order, when executed, would reduce the overall margin requirement. Existing orders remain in the order book as they are included in the current margin calculations.

Total Account Margin

Total Account Margin: total USDC equivalent of notional position of all assets available for margin, including any unrealized P&L, less any amount required for open non-margin (spot) orders.

When the Total Account Margin reaches the level of the Margin Liquidation Trigger, the account will start to get liquidated. The Margin Liquidation Trigger is set to 50% of the Initial Margin required for the open position(s) (not open orders). It is independent of the Total Account Margin in the account at the time when the trade was executed.

Margin Liquidation Trigger

Margin Liquidation Trigger: minimum amount of USD equivalent notional required to avoid liquidation.

If the Total Account Margin falls below the Margin Liquidation Trigger, the Account's leveraged positions (and/or collaterals, as the case may be) will be liquidated.

BTC Perpetual Futures Position Limits

EQONEX offers a maximum of 125x leverage for BTC Perpetual Futures. The maximum amount of leverage allowed for various position sizes is given in the table below. By design, our position limits align the expected risk on the platform with regard to trading volume and the size of the Liquidation Reserve. This is to reduce the probability of auto-deleveraging (“ADL”). These limits will be reviewed regularly and amended as necessary.

Leverage

Max notional exposure (USDC)

Initial Margin

Margin Liquidation Trigger

1.5

25,000,000

66.67%

33.33%

2.0

12,500,000

50.00%

25.00%

3.3

2,500,000

30.00%

15.00%

4.0

1,500,000

25.00%

12.50%

5.0

1,000,000

20.00%

10.00%

10.0

700,000

10.00%

5.00%

20.0

400,000

5.00%

2.50%

40.0

250,000

2.50%

1.25%

50.0

150,000

2.00%

1.00%

75.0

50,000

1.33%

0.67%

100.0

25,000

1.00%

0.50%

125.0

10,000

0.80%

0.40%

The Initial Margin required for a certain size position follows a tax style bracket approach, starting from the highest leverage bucket.

To illustrate the above, assume a trader wants to buy 100k worth of BTC Perpetual Futures. To do so, the Initial Margin requirements would be:
10,000 x 0.8% = 80
15,000 x 1.0% = 150
25,000 x 1.33% = 332.50
50,000 x 2.0% = 1,000
Total = 1,562.50
Leverage = 100,000 / 1,562.50 = 64x

The Margin Liquidation Trigger would be 50% of the Initial Margin requirement, 781.25.
As long as the Total Account Margin is more than 1,562.50, the trader is able to continue to buy BTC Perpetual Futures up to the point where the Initial Margin requirement equals their Total Account Margin balance. If the Total Account Margin balance reaches 1,562.50 or below, they are no longer able to send any new buy orders. They can still send sell orders to reduce the overall exposure.

If the margin balance continues to decline to the Margin Liquidation Trigger of 781.25 or below, the account will be moved into forced liquidation to close out the open positions.

Basis (Funding)

Unlike dated futures, perpetual futures are contracts that have no set expiry and therefore are, in a way, similar to a margin-based spot market. To ensure the perpetual futures prices are kept in line with the underlying spot prices, the contracts have an exchange of payment between buyers and sellers depending on where the future is trading relative to the underlying spot price. At EQONEX we refer to the spread between spot and Perpetual Futures prices as Basis and the resulting exchange of payment as the Basis Payment.

Other platforms may refer to this value as funding. Basis should be seen as the equivalent practice on EQONEX. However, as we currently do not include any cost of funding the trade in this calculation, we believe it to be misleading to call it funding and hence it is defined purely as Basis.

Basis (Funding)

At EQONEX the Basis is calculated and settled in USDC every 8 hours at 04:00, 12:00, and 20:00 UTC.

In order to calculate the Basis of the Perpetual Futures, we compare the difference between the Market Price of the EQONEX Spot contract and the Market Price of the Perpetual Futures over the past 8 hours:

Basis = 8 hour time-weighted average price (TWAP) of (Spot Market Price - Perpetual Futures Market Price)

The TWAP is based on the average of the open, high, low and close of each 1-minute bar.

The Basis is capped/floored at +/- 0.375% * Perpetual Futures Mark Price at the Basis calculation time to avoid instantaneous liquidation for positions with high leverage.

For example, if the Basis has been calculated as 40 USDC and the current Perpetual Futures Mark Price is 10,000 then the Basis would be capped at 37.50 USDC for every 1 Perpetual Futures held. For a user wishing to utilize the maximum leverage on EQONEX the largest position size they could take (based on the leverage table) is 10,000, which is the current price of 1 contract. The Initial Margin for this trade would be 80 USDC. The Margin Liquidation Trigger would be 40 USDC. If the trade were to occur right before a Basis Payment event, then if the Basis was allowed to be 40 USDC or higher positions could be instantly liquidated. The cap prevents this.

Note that the Market Price may be different from the Mark Price used to value futures contracts during trading hours, which is bound by the Exchange Index to mitigate against manipulative trading.

For more information on marking, please see the Marking section in this document.

Basis Payment

The Basis Payment is an exchange of payment between long and short holders of the Perpetual Futures contract, based on the calculated Basis:

Basis Payment = Position Size * Basis

The Basis and Basis Payment are defined from a long holder’s perspective such that when Spot Market Price < Perpetual Futures Market Price, every long holder of the Perpetual Futures pays the short holders of the Perpetual Futures a value equal to their Position Size times Basis.

For example: You sold 2 BTC Perpetual Futures and the Market Price of the Perpetual Futures has been trading $5 above the Market Price of spot for the past 8 hours. Assuming the basis payment cap/floor is not reached, you will receive a total Basis Payment of $10. You will only pay or receive funding if you hold a position in the Perpetual Futures at the time of Basis calculation.

Liquidation Process

EQONEX has unique features and functionality explicitly dedicated to managing liquidation orders. Although EQONEX aims to minimize the chances of ADL it should be noted that the risk of ADL can never be completely removed. EQONEX aims to minimize the possibility of ADL using the following 3 functions:

  1. Liquidation Platform: a dedicated liquidity pool exclusively used for liquidation. Exclusive participants may be invited to join the Liquidation Platform in order to add greater depth and provide price competition to ensure that liquidation orders are executed at the market price for the account holder;

  2. EQONEX order book: if there is no liquidity available at the Zero Price or better on the Liquidation Platform then orders will be sent to the main EQONEX order book; and

  3. Liquidation Reserve: if there is not enough liquidity on the EQONEX order book then the Liquidation Reserve will take the position at the Zero Price.

Functional Diagram

Liquidation Fee

Any order that is executed due to a Margin Liquidation Trigger is charged a liquidation fee of 0.375% on the order size executed at the price at which the liquidation order was filled or partially filled. This liquidation fee will be paid to the Liquidation Reserve. No trading fees will be charged to the account for this transaction.

Zero Price

The Zero Price is the price at which the Total Account Margin would be fully depleted. It is adjusted for the liquidation fee to ensure sufficient funds remain in the account to pay this fee upon liquidation.

Liquidation Process

EQONEX continuously values a trader's positions and calculates their Initial Margin requirement based on filled and open orders. A trader can only continue to send orders as long as their Total Account Margin remains larger than the Initial Margin requirement. As soon as the Total Account Margin drops below the amount of Initial Margin required, no new orders can be added unless they reduce the existing exposure. A more detailed description of margin concepts and margin requirements for positions on EQONEX can be found in the Leverage/Margin section in this document.

An account will start to be liquidated when the Total Account Margin reaches the Margin Liquidation Trigger. The Margin Liquidation Trigger is based on open positions only and does not include open orders. At this point, all open orders for the account are canceled, including any open spot orders, as they impact the Total Account Margin. If the Total Account Margin is still below the Margin Liquidation Trigger, the account's leveraged positions (and/or collaterals, as the case may be) will start to get liquidated.

Step 1: Liquidation platform

When an account needs to get liquidated, the risk engine first sends an order to our Liquidation Platform with a limit price based on the Zero Price.

The Liquidation Platform prices can only be filled by liquidation orders, never by regular market orders. If the order can be filled in full the account is liquidated at this price and the liquidation is now complete. If the order is completed above the Zero Price then any excess funds, after fees are charged, are retained by the account holder. If the order was not fully filled, the liquidation moves to step 2.

Step 2: Our EQONEX order book

If the order could not be filled in full in the previous step, the remaining order size is sent to the main order book with the same Zero Price limit. If the remaining order size can be absorbed here, then the liquidation is complete. If the order is completed above the Zero Price then any excess funds, after fees are charged, are retained by the account holder.

Step 3: Liquidation Reserve

If there is still an outstanding balance after step 2 or if the portfolio was already in negative equity before step 1 then this position is transferred to the Liquidation Reserve at the Zero Price. This could occur should the market instantaneously move beyond the Zero price for an account. For example, if an account was long 1 Perpetual Futures at 10,000 with Initial Margin and Total Account Margin of USDC 80 (125x leverage) then, assuming no liquidation fee for simplicity for the sake of this example, the Zero Price is 9,920. If the market was to drop suddenly to 9,900 then the account would have a balance of -20 USDC. Hence, the position would be assigned to the Liquidation Reserve at 9,920 and the account balance would move to zero for the client. Any losses beyond the Zero Price, in other words any negative margin balances like the -20 USDC in the example, will be absorbed by the Liquidation Reserve. This step is conditional on the Liquidation Reserve being sufficient to be able to manage the risk of the positions.

Step 4 : Auto Deleveraging

The exchange will only enter ADL if the Liquidation Reserve is depleted to the point that no further risk can be absorbed by the Liquidation Reserve.

Auto-Deleveraging Process (ADL)

If a liquidation order cannot be filled on the Liquidation Platform or the public order book and the Liquidation Reserve is not able to absorb any additional risk, then the positions that need liquidation must be closed out against other open positions on EQONEX. This is the ADL process. EQONEX has taken a market standard approach to ADL based on profitability and leverage. Positions are ranked based on their P&L percentage and effective leverage. In the case that EQONEX needs to liquidate portfolios through ADL, higher leveraged and more profitable positions are matched first. This process continues until all liquidation orders are filled.

Ranking

For each position:
If P&L percentage >= 0 then
Ranking = P&L Percentage * Leverage
If P&L percentage < 0 then
Ranking = P&L Percentage / Leverage

Where
P&L percentage = Notional Position / Entry Position - 1
Notional Position = sum(Position Size * Mark Price)

  • over all trades that have not expired

Entry Position = sum(Position Size * Entry Price)

  • over all trades that have not expired

Leverage = abs(Notional Position) / Total Account Margin

BTC Perpetual Futures Datasheet

Item

Description

Fix Field Name

Fix Tag

Ticker

BTC/USDC[F]

Symbol

55

Name

BTC/USDC [Perpetual Futures]

SecurityDesc

107

Instrument Type

Perpetual Futures

CFICode

461

Issue Date

[The official Issue Date]

IssueDate

225

Underlying

1 BTC

UnderlyingSymbol

311

Quote currency

USDC

Currency

15

Minimum Trade Size

0.001 BTC

MinTradeVol

562

Minimum Tick Size

0.01 USDC

MinPriceIncrement

969

Trading Hours

24 hours/day, 7 days/week, 365 days/year (excluding maintenance)

Expiration

The Perpetual Futures are non-expiring, which means that positions in the contract are never "expired" or "matured"

Delivery price

(Not Required - since there is no delivery)

Settlement Method

Cash settled in USDC.

SettlCurrency

120

Fees

Fees are charged based on customer fee tier (as set out in the EQONEX website).

Liquidation trades are charged a 0.375% fee, which will be paid to the Liquidation Reserve. No trading fees are charged for liquidations.

Position Size

Amount of BTC/USDC [Perpetual Futures] held

The position size is positive for long position holders and negative for short position holders

Position Value

Position Size x Mark Price

Position Limit

There is no maximum position limit for this product.

Market Price

The last traded price

Mark Price

3 second TWAP of the Market Price The Mark Price will be capped at (Exchange Index + 0.2%) and floored at (Exchange Index - 0.2%).

The TWAP is based on the average of the open, high, low and close of each 1 second bar.

If the Market Price is not available, Exchange Index + Basis at last basis calculation

Exchange Index

Exchange Index: simple average of the spot price of the following pairs on the following exchanges, all converted into USD at such rate as EQONEX shall determine. Any prices older than 100 milliseconds (ms) are removed.

  • Binance: BTC/USDT

  • Kraken: XBT/USD

  • Coinbase: BTC/USD

  • Gemini: BTC/USD

  • Bitstamp: BTC/USDC

Basis

Basis = 8-hour TWAP of (Spot Market Price - Perpetual Futures Market Price)

The Basis is capped and floored at +/- 0.375% x Perpetual Futures Mark Price.

8-hour TWAP is based on 1-minute blocks, from the previous Settlement Time to the next Settlement Time

Basis Payment

Position Size x Basis

If Basis is negative then long position holders pay short position holders the Basis Payment. If Basis is positive then long position holders receive the Basis Payment from short position holders.

Basis Settlement

Basis settlements take place every day at 04:00, 12:00 and 20:00 UTC.

Total Account Margin

The value, in USDC, of assets on account that can be used as collateral for margin trades.

Initial Margin

The Initial Margin requirement is based on the current Notional Limits for Margin (as set out on the EQONEX website).

Margin Liquidation Trigger

The Margin Liquidation Trigger is set at 50% of the Initial Margin for open positions.

When the Total Account Margin balance is lower than the Margin Liquidation Trigger, open positions in the account will be liquidated. EQONEX has the right to change the Margin Liquidation Trigger requirements without prior notice if, in EQONEX’ opinion, the market circumstances warrant such action.

Available Margin

Total Account Margin - Initial Margin

Reserved Margin

Part of the Initial Margin applicable to open orders

© 2021 DIGITAL SOFTWARE TECHNOLOGY PTE. LTD.

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