In Gate futures trading, we use a “dual-price mechanism” to protect users from market manipulation and avoid unnecessary liquidations due to market fluctuations.
What is Dual-Price Mechanism
Dual-price mechanism is a protection system consisting of the mark price and the last market price, designed to prevent market manipulation. Under this mechanism, liquidations are determined based on the mark price rather than the last market fill price, helping traders avoid losses from market volatility.
Market manipulation may cause the futures price to deviate from the spot price, triggering extensive liquidations. To create a fair trading environment, Gate has introduced the dual-price mechanism, where the mark price is used to calculate unrealized PNL and helps prevent unnecessary liquidations.
What is Mark Price
Mark price is the fair price of the futures market at a given moment, calculated based on the spot index price and a premium index. Its primary function is to prevent market manipulation and unnecessary liquidations. When order prices deviates from external spot prices, the mark price helps stabilize the order price and avoids large price fluctuations.
Mark Price Calculation Formula
Mark Price = Median (Price 1, Price 2, Last Fill Price)
- Price 1 = Index Price × (1 + Funding Basis Rate)
- Funding Basis Rate = Funding Rate × (Time to Next Funding Payment / Funding Interval)
- Price 2 = Spot Index + Moving Average Basis
- Moving Average Basis = SUM(Sampled Basis) / Number of Samples
- Basis = (Best Bid + Best Ask) / 2 – Index Price
The sampled basis typically consists of values calculated every second over the past five minutes. The platform may flexibly adjust the sampling time window based on market volatility to ensure the mark price remains fair and is not subject to manipulation.
The Role of Mark Price
The primary role of the mark price is to reduce liquidations caused by short-term market volatility. As the mark price reflects the “true” market value of the contract, it can effectively prevent market manipulation. For example, if the spot price is $5,000 while the futures market price is $5,010, the mark price can anchor to the external spot price, preventing liquidations due to price deviation.
Risk Warning
Futures trading carries significant risk, especially during periods of intense price fluctuations. There may be a substantial variance between the mark price and the last market fill price. Since unrealized PNL is calculated based on the mark price, there may be discrepancies between displayed and actual PNL. You should closely monitor the variance between the mark price and the estimated liquidation price during trading to avoid liquidation triggered by market fluctuations.
Please note that all trades should exercise with caution. The mark price is for reference only, and actual trades are based on the last fill price.
Gate reserves the final right to interpret the product.
For further assistance, please visit the Gate official support page or contact our customer support team.
