Deribit Perpetual

1. Introduction

The Deribit Perpetual is a derivative product similar to a future, but one without an expiry date.

A Perpetual features so called ‘funding payments’ in order to keep its price close to the underlying crypto price, the Deribit BTC Index. If the Perpetual trades higher than the Index, traders that are long the perpetual need to make funding payments to the shorts. This will make the product less attractive to longs and more attractive to shorts and this will serve to push the Perpetual price back down to the level of the Index. If the Perpetual trades lower than the index the shorts will have to pay the longs.

The Deribit Perpetual features a continuous measurement of the difference between the mark price of the perpetual contract and the Deribit BTC Index. The percentage difference between those two price levels is the basis for the 8-hourly funding rate that is applied to all perpetual contracts that are outstanding.

Funding payments under the Deribit Perpetual contract are calculated every millisecond. The funding payments will be added to or subtracted from the realised PNL account which is also part of your available trading balance. At daily settlement the realised PNL will be moved to or from your cash balance that withdrawals can be made from.

The actual funding paid will show up in your transaction history, where we added a column called "funding". This column shows the funding amount that is applied to your entire net position in the period between the relevant trade and the trade before that. Put differently: in the funding column you see the funding paid or received on your position between position changes.

2. Contract Specifications BTC Perpetual

Underlying asset/ ticker
Deribit BTC Index
Contract
1 dollar per Index Point, with contract size $10 USD
Trading hours
24H and 7 days a week
Minimum tick size
0.25 USD
Settlement
Daily settlements at 8.00 UTC. Your realised and unrealised session profits (profits made from one settlement to other settlement) are always in real time added to your equity but are only available for withdrawal after settlement. At settlement your session profits/losses will be booked to your BTC cash balance.
Contract size
10 USD
Initial margin

Starting with 1.0% (100x leverage trading), linearly increasing 0.5% per 100 BTC increase in position size.

Formula: Initial margin = 1% + {PositionSize in BTC * 0.005%) 

Examples:

Your position is 0 BTC size: initial margin is 1% ( = 0 BTC)

Your position is 25 BTC in size: initial margin is 1% + 25/100 *0.5% = 1.125% (= 0.28125 BTC)

Your position is 350 BTC in size: initial margin is 1% + 350/100 *0.5% = 2.75% (= 9.625 BTC) 

Maintenance margin

Starting with 0.575%, linearly increasing with 0.5% per 100BTC increase in position size. When account margin balance is lower than the maintenance margin, positions in the account will be incrementally reduced as to keep maintenance margin lower than the equity in the account. Maintenance margin requirements can be changed without prior notice if market circumstances demand such action. 

Formula: Maintenance Margin= 0.575% + {PositionSize in BTC} * 0.005%

Examples:

Your position is 0 BTC size: maintenance margin  is 0.575% ( = 0 BTC)

Your position is 25 BTC in size: maintenance margin is 0.575% + 25/100 *0.5% = 0.7% (= 0.175 BTC)

Your position is 350 BTC in size: maintenance margin is 0.575% + 350/100 *0.5% = 2.325% (= 8.1375 BTC) 

Mark price
The mark price is the price at which the perpetual contract will be valued during trading hours. This can (temporarily) vary from the actual perpetual market prices to protect against manipulative trading. The mark price is being calculated as the index price + 30 seconds EMA of (PerpetualFairPrice-Indexprice). Perpetual Fair Price is the the 1BTC deep in the book average of bid and ask. 
Delivery/Expiration
No Delivery / Expiration
Fees

Taker fee 0.075% / Maker rebate 0.025%.  Liquidation trades are charged 0.30% extra fee, which will be income for the insurance fund.

Position LimitMaximum allowed position is 1.000.000 contracts ($ 10.000.000). Portfolio margin users are excluded from this limit and can build up larger positions. On request position limit could be raised on a per account basis evaluation.

2a. Contract Specifications ETH Perpetual

Underlying asset/ ticker
Deribit ETH Index
Contract
1 dollar per Index Point, with contract size $1 USD
Trading hours
24H and 7 days a week
Minimum tick size
0.01 USD
Settlement
Daily settlements at 8.00 UTC. Your realized and unrealized session profits (profits made from one settlement to other settlement) are always in real time added to your equity but are only available for withdrawal after settlement. At settlement your session profits/losses will be booked to your ETH cash balance.
Expiration dates
Expirations are always at 08.00 UTC at the end of the month. Currently there are 2 quarterly futures (expiry last friday of March, June, September and December). A new future with new expiry date will be added 1 hour before the expiry of the front future.
Contract size
1 USD
Initial margin

Starting with 2.0% (50x leverage trading), linearly increasing 1% per 10,000 ETH increase in position size.

Formula: Initial margin = 2% + {Position Size in ETH} * 0.0001%

Maintenance margin

1%, linearly increasing 1% per 10,000 ETH increase in position size.

Mark price
The mark price is the price at which the perpetual contract will be valued during trading hours. This can (temporarily) vary from the actual perpetual market prices to protect against manipulative trading. The mark price is being calculated as the index price + 30 seconds EMA of (PerpetualFairPrice-Indexprice).  The perpetual Fair Price is the 1ETH deep in the book average of bid and ask price.
Delivery/Expiration
No Delivery/Expiration

Delivery method
Cash settlement in ETH
Fees

Taker fee 0.075% / Maker fee -0.025% (0.025% rebate). Liquidation trades are charged 0.9% extra fee, which will be income for the insurance fund.

Position LimitMaximum allowed position is 10,000,000 contracts ($ 10,000,000). Portfolio margin users are excluded from this limit and can build up larger positions. On request position limit could be raised on a per account basis evaluation.

3. Funding Rate

Calculations of the funding rate for the Bitcoin Perpetual and Ethereum Perpetual are identical.

When there is a positive funding rate longs pay funding to shorts; when we have a negative funding rate, shorts pay funding to the longs. The funding rate percentage, expressed as an 8-hourly interest rate, is calculated as follows at any given point in time:

First we calculate the Premium Rate

Premium Rate = ((Mark Price - Deribit Index) / Deribit Index) * 100%

Next we calculate the Funding Rate

From the Premium Rate the Funding Rate can be calculated by applying a dampener. If the Premium Rate is within -0.05% and 0.05% the actual Funding Rate will be reduced to zero.

If the premium rate is lower than -0.05%, then the actual funding rate will be the Premium rate + 0.05%.
If the premium rate is higher than 0.05%, then the actual funding rate will be the Premium rate - 0.05%.
Funding Rate = Maximum (0.05%, Premium Rate) + Minimum (-0.05%, Premium Rate)

Finally we calculate the Time Fraction

Time Fraction = Funding Rate Time Period / 8 hours


The actual Funding Payment is calculated by multiplying the Funding Rate by the position size in BTC and the Time Fraction.

Funding Payment = Funding Rate * Position Size BTC * Time Fraction


Example 1: With a mark price of USD 10,010 and a Deribit Index of USD 10,000, the Funding Rate and Premium Rate are calculated as follows:

Premium Rate = ((10,010 - 10,000) / 10,000) * 100% = 0.10%

Funding Rate = Maximum (0.05%, 0.10%) + Minimum (-0.05%, 0.10%)
= 0.10% - 0.05% = 0.05%

Now say you have a long position of USD 10,000 (1BTC) for 1 minute, and during that minute the Mark Price stays on USD 10,010 and the Deribit Index stays on 10,000, the funding calculation for this period is:

8 hours = 480 minutes so:

Funding Rate = 1/480 * 0.05% = 0.0001041667%

Funding Payment = 0.0001041667% * 1 BTC = 0.000001041667 BTC

The shorts receive this amount and the longs pay it.


Example 2: If you would hold the position in the previous example for 8 hours and the Mark Price and Deribit Index remain on USD 10,010 and USD 10,000 respectively for the entire period, then the Funding Rate would be 0.05% and the Funding Payment paid by the longs and received by the shorts for that 8 hour period would have been 0.0005 BTC (or $5.00).


Example 3: Say the mark price is USD 10,010 for 1 minute, and the Mark Price is USD 9,990 the minute after that. All that time the Index remains the same at USD 10,000. Now the total funding paid in this two minute period for a 1 BTC long position is exactly 0 BTC.

The first minute you pay 1/480 * 0.05% = 0.0001041667% * 1 BTC = 0.000001041667 BTC, but the minute after that you receive exactly the same amount.


Example 4: The mark price is USD 10,002 and the Index remains at USD 10,000. Now the real time funding paid is Zero (0%), because the mark price is within the 0.05% dampener from the index (within USD 9,990 and USD 10,010).


We can check this using the Premium Rate and Funding Rate formulas

Premium Rate = ((10,002 - 10,000) / 10,000) * 100% = 0.02%

Funding Rate = Maximum (0.05%, Premium Rate) + Minimum (-0.05%, Premium Rate)

= 0.05% - 0.05% = 0.00%

In reality, the spread between the Deribit BTC Index and and the Mark Price of the Perpetual Contract changes continuously, and all those changes are taken into account. So the examples above are extreme simplifications of actual calculations of funding over a certain period.

The funding payed or received is continuously added to the realised PNL of your position and is moved to or from your cash balance at settlement, every day at 08.00 UTC.

No fees on funding: Deribit does not charge any fees on funding and all funding is transferred between participants in the Perpetual contracts. This makes the funding a zero sum game, where longs receive all funding from shorts, or shorts receive all funding from longs.

4. Mark Price

It is important to understand how the Mark Price is being calculated. We start with determining a "Fair Price". This Fair Price is calculated as the average of the Fair Impact Bid and Fair Impact Ask price.

The Fair Impact Bid is the average price of a 1 BTC size market sales order or the best bid price - 0.1% which ever has a greater value.

The Fair Impact Ask is the average price of a 1 BTC size market purchase order or the best offer price + 0.1% which ever has a lower value.

Fair Price = (Fair Impact Bid + Fair Impact Ask) / 2

The Mark Price is derived using both the Deribit Index and the Fair Price, by adding to the the Deribit Index the 30 seconds exponential moving average (EMA) of the Fair Price - Deribit Index.

Mark Price = Deribit Index + 30 seconds EMA (Fair Price - Deribit Index)

Further the Mark Price is hard limited by Deribit Index +/- 0.5%, so under no circumstance the mark price of the future can divert more than 0.5% from the Deribit Index.

Trading outside of this bandwidth is still allowed.

The 30 seconds EMA is recalculated every second, so there are in total 30 time periods, where the measurement of the latest second has a weight of 2 / (30 + 1) = 0.0645 or (6.45%)

5. Allowed trading bandwidth

The bandwidth between which trading is allowed is bounded by 2 additional parameters:

Perpetual trades limited by: Deribit Index + 1 minute EMA (Fair Price - Index) +/- 2% and a fixed bandwidth around the Deribit Index +/- 3%. If market circumstances require so, bandwidth parameters could be adjusted at the sole discretion of Deribit.

6.  Order Types

Currently our matching engine handles "Market", "Limit" orders and "Stop Limit" orders. Further you can specify if you want an order to be hidden and or post-only.

MarketMarket: Your order will be matched for the best possible price. The only price limit attached to this order is the allowed trading bandwidth of the instrument imposed by Deribit Risk Management System.
LimitLimit: Your buy order comes with a maximum limit price or your sales order comes with a minimum sales price. Your order will not match above the order price for buy orders or below the order price for sales orders.
Stop-LimitStop Limit: A conditional order, where the Limit order only is being sent to the market once the mark price or the index price reached a certain level. For a Buy Stop Limit order the trigger price needs to be higher than current, and for a Sell Stop Limit, the trigger price needs to be lower than current values. 
Post-OnlyPost only: By placing a post-only order, your order will not match immediately with the order book under any circumstance, such that in case of execution of the order, the trader will receive a rebate or pay lower transaction costs. If needed the matching engine will adjust the price of the order, such that it will be the best possible price but still go in the order book as a maker order.
HiddenHidden: Hidden orders will not show in the order book and thus are invisible to other traders. A hidden order will always match as a taker order, and non hidden orders with the same price have matching preference in the matching engine.
Reduce onlyReduce-Only orders will only execute for that part that this would reduce your position. Can be used in combination with stop-order type, to be sure that the order, once triggered will only reduce your position. The size of the order will be automatically re-adjusted down if the order size is bigger than your position. The size of the order will under no circumstances (re-)adjust upwards.

7. Video Guide