BitMEX uses the Fair Price Marking Method to determine the price at which perpetual and futures contracts are marked. This method prevents unnecessary liquidations by smoothing out temporary price fluctuations. The fair price (or mark price) may differ from the last traded price. Realised PNL is always based on actual entry and exit prices.
What Is the Fair Price Marking Method?
BitMEX uses the Fair Price Marking Method to set the price at which perpetual and futures contracts are valued.
For Perpetual Contracts: Fair Price = Index Price + decaying Funding basis rate.
For Futures Contracts: Fair Price = Index Price + annualised Fair Value basis rate.
This system is critical for two functions:
- Preventing unnecessary liquidations: Fair price marking smooths out temporary price fluctuations and manipulation attempts. Without it, a brief price spike on the BitMEX order book could trigger mass liquidations even though the broader market price remained stable.
- Calculating unrealised PNL: The fair price provides a more stable and accurate representation of your potential profits or losses on open positions.
The fair price is derived from the underlying index price rather than the last traded price on BitMEX.
How Does Fair Price Differ from Last Traded Price?
The fair price (mark price) and the last traded price serve different purposes and frequently differ.
- Mark price: Used for margin calculations, unrealised PNL, and liquidation triggers. Derived from the multi-exchange index price.
- Last traded price: The actual price at which contracts were most recently bought or sold on BitMEX. Used for trade execution.
Your realised PNL is always calculated using your actual entry and exit prices (or settlement price for futures contracts). The mark price only affects unrealised PNL and liquidation calculations.