Important Note: Binance Futures uses a mark price as a reference in liquidations and calculations of unrealized PNL. Mark price is an estimated fair value of a contract and it differs from ‘last price’. A mark price is used to prevent unfair and unnecessary liquidations that may happen when the market is highly volatile. Additionally, it also helps to prevent price manipulation.

It is important to note that

**mark prices in both perpetual futures and quarterly futures are different and they are computed with different formulas and methodologies**. We highly recommended reading both sections (Mark Price in Perpetual Futures and Mark Price in Quarterly Futures) to get a clear understanding of mark price methodologies.A Mark Price consists of two components:

**Price****Index**and**Moving Average(MA) Basis**.A

**moving average basis**is used as the second component of mark price calculation. It helps to smooth out the price data over a specified period of time by creating a constantly updated average price. This methodology reduces the possibility of unfair and unnecessary liquidations when the market is highly volatile.**Price**

**Index**is an aggregate price extracted from the major spot exchanges, weighted by their relative volume, this is done to prevent price manipulation from a single exchange. The Price Index for coin-margined contracts derived prices from

**Bitstamp, Coinbase Pro, Kraken, Bittrex, Binance, Huobi and FTX.**

The Price Index references for each coin-margined futures contracts.

**Mark Price of Coin-Margined Perpetual Contracts**

Mark price = Median* (Price 1, Price 2, Contract Price)

Price 1 = Price Index * (1 + Last Funding Rate * (Time Until Funding / 8))

Price 2 = Price Index + Moving Average (30-minute Basis)*

*Moving Average (30-minute Basis) = Moving Average ((Bid1+Ask1)/2- Price Index), which measures every minute in 30-minute interval

*Median: If Price 1 < Price 2 < Contract Price, then take Price 2 as Mark price.

Please note that due to extreme market conditions or deviations in price sources, which may lead to mark price deviate from spot price, Binance will take additional protective measures, i.e. Mark price = Price 2 in this scenario.

Mark Price is a better estimate of the ‘true’ value of the contract, compared to Perpetual Futures prices which can be more volatile in the short term. We use this price to prevent unnecessary liquidations for traders and to discourage any market manipulations by poor actors.

**Mark Price of Coin-Margined Delivery Contracts**

Traditionally, the price of a quarterly futures contract will converge with its corresponding spot price as the contract expires after the three-month period. 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 quarterly futures contract will be computed differently as it reaches the time of expiration.

**Before delivery date:**

Mark Price = Price Index + Moving Average (30-minute Basis)*

*Moving Average (30-minute Basis) = Moving Average ((Bid1+Ask1)/2- Price Index), which measures every minute in 30-minute interval

**On the delivery date:**

**i) The time to delivery is greater than 1 hour**

Formula

**Mark Price before 25 September 2020, 06:59:59 UTC**

**= Price Index + Moving Average (30-minute Basis)***

*Moving Average (30-minute Basis) = Moving Average ((Bid1+Ask1)/2- Price Index), which measures every minute in 30-minute interval

How to Calculate

Step 1: Calculate the Price Index

Assume Binance uses an equally-weighted price average, the prices of BTCUSD trading pairs on the selected exchanges are 10,000 USD, 10,0001 USD, 10,0002 USD, 10,003 USD and 10,004 USD respectively.

Price Index = (10,000 + 10,001 + 10,002 + 10,003 + 10,004) / 5 = 10,002 USD

Step 2: Calculate the Moving Average on 30-minute Basis

Moving Average (30-minute Basis)

= Moving Average (Mid-Price*- Price Index), which measures every minute in 30-minute interval

*Mid-Price = (Bid1+Ask1)/2

To calculate moving average, we need to get the mid-price from the order book and Price Index of the first second of every minute for the past 30 minutes, then we will have n=30 in total.

For example, if we want to calculate the Mark Price of BTCUSD 0925 at 12:30:00 UTC, the Mid-Price and Price Index are as follows:

Time (UTC) | Mid-Price | Index Price |

12:00:01 | 10,003 | 10,001 |

12:01:01 | 10,004 | 10,002 |

12:02:01 | 10,005 | 10,006 |

... | ... | ... |

12:29:01 | 10,003 | 10,002 |

Moving Average (30-minute Basis)

= Moving Average (Mid-Price- Price Index)

= [(Mid-Price- Price Index)1 + (Mid-Price- Price Index)2 + … + (Mid-Price- Price Index)30 ] / 30

= [(10,003 - 10,001) + (10,004 - 10,002) + … + (10,005 - 10,006)] / 30

Step 3: Substitute the Price Index and Moving Average (30-minute Basis) into the formula

Let say Price Index = 10,002 USD and Moving Average (30-minute Basis) = -1

**Mark Price at 12:30:00 UTC**

**= Price Index + Moving Average (30-minute Basis)**

**= 10,002 USD - 1 USD**

**= 10,001 USD**

**ii) Time to delivery is equal or less than 1 hour**

Formula

**Mark Price on 25 September 2020, 07:00:00 - 07:59:59 UTC**

**= Average of Price Index (every second from 07:00:00 and 07:59:59 UTC on the delivery day)**

How to Calculate

Step 1: Calculate the Price Index

Assume Binance uses an equally-weighted price average, the prices of BTCUSD trading pairs on the selected exchanges are 10,000 USD, 10,0001 USD, 10,0002 USD, 10,003 USD and 10,004 USD respectively.

Price Index = (10,000 + 10,001 + 10,002 + 10,003 + 10,004) / 5 = 10,002 USD

Step 2: Calculate the Average of Price Index

Mark Price at Time n

= (Price Index 1 + Price Index 2 + … + Price Index n) / n

Example:

Mark Price at 7:00:02 on 25 September

= (Price Index at 7:00:00 + Price Index at 7:00:01 + Price Index at 7:00:02) / 3

= (10,002 + 10,003 + 10,004) / 3

= 10,003

Time (UTC) | Price Index | Mark Price |

07:00:00 | 10,002 | = 10,002/1 = 10,002 |

07:00:01 | 10,003 | = (10,002 + 10,003) /2 = 10,002.5 |

07:00:02 | 10,004 | = (10,002 + 10,003 + 10,004) / 4 = 10,003 |

... | ... | ... |

7:59:59 | 10,003 | = (10,002 + 10,003 + 10,004 + ... + 10,003) / 3,600 = ... |