Settlement is the process by which a BitMEX futures contract is finalised, and profit or loss is realised. The settlement price is calculated by averaging prices over a period leading up to the settlement time. This averaging prevents price manipulation at the exact moment of settlement. The specific averaging period varies by contract.
What Is Settlement on BitMEX?
Settlement is the process by which a futures contract reaches its expiry date and is finalised. At settlement, all open positions on the contract are closed at the settlement price, and the resulting profit or loss is realised.
Unlike perpetual contracts, which have no expiry date and trade indefinitely, futures contracts settle on a predetermined date. After settlement, the contract ceases to exist and no further trading is possible.
Your realised PNL at settlement is calculated using your average entry price and the settlement price, adjusted for any fees and funding payments incurred during the life of the position.
How Is the Settlement Price Calculated?
The settlement price is calculated by averaging prices over a specific time period leading up to the settlement time. This averaging mechanism serves a critical purpose: it prevents manipulation of the settlement outcome.
Without averaging, a large trader could push the price sharply in one direction at the exact moment of settlement to profit at the expense of other market participants. By averaging over a window, the impact of any single trade or short-term manipulation is diluted.
The specific time frame used for the averaging varies depending on the futures contract. Different contracts may use different averaging windows based on their liquidity and market characteristics. Refer to the contract specification for the exact settlement methodology of any given futures contract.