Content of this article:

What is futures contract

Futures trading fee and settlement fee

PNL calculations

Mark price calculations

Risk allocation mechanism

1. What is futures contract

XT Futures Contracts refer to the derivative of digital assets settled with USDT, BTC, and ETH. The futures contract has no funding fee, and shares the USDT-M/Coin-M margin account with the perpetual contract in the cross-margin mode.

It’s a contract to buy or sell a particular underlying asset at a predetermined price at a specified time in the future. It’s different from the perpetual contract in that the futures contract has a delivery date (that the contract will expire). When the futures contract expires, both buyer and seller are obliged to perform the contract and complete the contract no matter what the actual price of the underlying assets is.

If the settlement price is higher than the opening price, the buyer makes a profit; if the settlement price is lower than the opening price, the seller makes a profit.

Instruction of the code of futures contracts:

Take the BTC_USDT0106 this week as an example:

BTC refers to the basic currency of the futures contract; USDT refers to the quote currency of the futures contract; 0106 refers to the expiring date, that is the delivery date; this week refers to a duration of one week, that the contract will expire this week.

It refers to the process for settling the unrealized liquidation or a holding contract on the delivery date. 

XT uses the weighted average index 1 hour before settlement as the settlement price, to prevent the risk of instant market manipulations. For more information, please refer to the contract details.

Trading rules:

Instead of a daily basis, XT futures contract will only be settled on the expiring date. No other contracts will be suspended during settlement. 

Positions can be closed but not be opened in the last 10 minutes before the delivery.

The settlement time for the weekly contract is 8:00 (UTC), every Friday. The settlement time for the monthly contract is 08:00 (UTC) on the last Friday of the month, and the settlement time for the quarterly contract is 8:00 UTC, the last Friday of that quarter.

Contract trading may be interrupted. The duration of interruption depends on the time taken by the system to conduct the settlement and delivery. The time for interruption and recovery is different among contract varieties, that is, if BTC is still in settlement while ETH is finished, then the recovery of ETH trading is ahead of BTC.

After the delivery, the next week, next month, and next quarter futures inherit the K-line and futures name of the current week, current month, and current quarter for trading.

XT applies the mark price as the basis of liquidation and adopts the ADL and Funding Insurance mechanism like the perpetual contracts so that there will be no loss-sharing.

2. Futures trading fee and settlement fee

Futures trading fee rate:

1) Maker: 0.04%, supports VIP rate system.

If the order placed by the maker is not taken immediately, it will be displayed in “the depth of the market”, which will increase the depth of the market.

2) Taker: Please refer to the table of tiered fee rates.

Takers trade initiatively with the placed orders and reduce the existing maker orders in the market, thus reducing the depth of the market. If there are no sufficient points, the fee will be charged according to the table of tiered fee rates.

Settlement fee is charged the same as taker fee for all positions settled on the delivery date.

Note: Since there is a delivery date for a futures contract, no funding fee will be charged.

The trading fee is calculated as:

Trading Fee = Position Value * Funding Rate

3. PNL calculations

The futures contract provided by XT.COM currently supports only contracts with USDT, BTC and ETH settlements.

Like the perpetual contract, the PNL can be realised by operating bullish and bearish according to the market quotation. But there’s a settlement date for the futures contract that cannot be long-held.

The futures contract information can be viewed in the futures information:

The PNL for a futures contract is calculated using the formula as a perpetual contract.

• Long：Amount (CNT) * Face Value (CNT) * (1 / Avg. Open Price – 1 / Mark Price)
• Short：Amount (CNT) * Face Value (CNT) * (1 / Mark Price – 1 / Avg. Open Price)

The PNL for a futures contract is calculated using the formula as an inverse perpetual contract.

• Long：Amount (CNT) * Face Value (CNT) * (1 / Avg. Open Price – 1 / Mark Price)
• Short：Amount (CNT) * Face Value (CNT) * (1 / Mark Price – 1 / Avg. Open Price)

4. Mark price calculations

Traditionally, the price of a quarterly futures contract will converge with its corresponding spot price as the contract expires. As the contract runs down towards expiry, the Mark price will closely reflect spot prices, and the moving average basis component will no longer be part of the Mark price calculation. This means that the Mark price of a futures contract will be computed differently as it reaches the time of expiration.

Before delivery date:

USDT-M futures:

Mark Price = Index Price+ 5-minute Basis Moving Average

5-minute Basis Moving Average = Σ((Bid 1 + Ask 1) / 2 – Index Price), measures every minute in a 5-minute interval

Coin-M futures:

Mark Price = Index Price + 30-minute Basis Moving Average

30-minute Basis Moving Average = Σ((Bid 1 + Ask 1) / 2 – Index Price)，measures every minute in a 30-minute interval

On the delivery date:

1) The time to delivery is greater than 1 hour

USDT-M futures:

Mark Price = Index Price + 5-minute Basis Moving Average

5-minute Basis Moving Average = Σ((Bid 1 + Ask 1) / 2 – Index Price)，measures every minute in a 5-minute interval

Coin-M futures:

Mark Price = Index Price + 30-minute Basis Moving Average

30-minute Basis Moving Average = Σ((Bid 1 + Ask 1) / 2 – Index Price), measures every minute in a 30-minute interval

Please note:

• During the system upgrade or the system down that pending all trading activities, the Mark price of a Quarterly Futures Contract whose time to delivery is greater than 1 hour is calculated as follows:
  Keep the Mark price formula but use the Bid1 and Ask1 at the system stop time to calculate Moving Average (5-minute Basis) until the system is back to normal.

2) Time to delivery is equal or less than 1 hour

Mark Price = Average Index Price

Average Index Price = (Index Price 1 + Index Price 2 + … + Index Price n) / n，measures every second in a 1-second interval

5. Risk allocation mechanism

Futures contract adopt insurance funds and Auto Deleveraging to allocate and control risk.

Rules for insurance fund:

The insurance fund is used by XT.COM to resist the risk of massive liquidation, mainly composed of the fund provided by XT.COM and the liquidation surplus from the liquidation orders.

Types of Futures Contracts	USDT-M Futures	Coin-M Futures
Rules for insurance fund	For USDT-margined futures, the insurance fund currency for all the contracts is USDT, but the pools are independent of each other.	For Coin-margined futures, contracts with different underlyings are provided with the insurance funds in the corresponding currencies.
Example	ETHUSDT futures (weekly, bi-weekly, monthly, bi-monthly, quarterly, bi-quarterly) has an insurance fund with currency USDT, and so does BTCUSDT futures. But their insurance fund pools are independent of each other and cannot be calculated together.	BTCUSD futures (weekly, bi-weekly, monthly, bi-monthly, quarterly, bi-quarterly) has an insurance fund with currency BTC, and all the BTCUSD futures contracts with different expiry dates share the same fund.

Auto-Deleveraging (ADL) rules:

Autoーdeleveraging, abbreviated as ADL, refers to a mechanism for liquidation of counterparty positions to control the platform’s overall risk when extreme market conditions or force majeure lead to insufficient of the insurance fund. After ADL is triggered, the platform will no longer use the method of placing orders on the market and waiting for a suitable price to liquidate or partially liquidate user’s positions, but directly find the counterparty account with the highest ranking and trade with the mark price at the time. After the transaction is completed, the counterparty position will be closed. The profits from the position will be added to the account balance. When the mechanism is adopted, the clawback will no longer be triggered.

About XT.COM

Founded in 2018, XT.COM now serves nearly 8 million registered users, over 1,000,000+ monthly active users and 40+ million users in the ecosystem. Our comprehensive trading platform supports 800+ high-quality tokens and 1000+ trading pairs. XT.COM crypto exchange supports a rich variety of trading, such as spot trading, margin trading, and futures trading together with an aggregated NFT marketplace. Our platform strives to cater to our large user base by providing a secure, trusted and intuitive trading experience.