Mark Price
I. What is the Mark Price?
The contract mark price is a calculated, theoretical fair value price. It is not the real-time trading price you see on the exchange's order book.
Its core purpose is to accurately reflect the true market value of the underlying asset as much as possible, avoiding price abnormalities caused by insufficient liquidity or market manipulation on a single exchange.
Market Price
The actual price at which you open and close positions, determined by the latest trades on the exchange's order book. It is highly volatile.
Mark Price
The price used by the system to record your account's performance, calculating whether your position is profitable or loss-making and whether it will be liquidated. It is relatively smooth and fair.
II. How is the Mark Price Calculated?
The mark price is not arbitrarily set; it follows a universal calculation method, typically referencing two key factors:
(1) Spot Index Price
This serves as the foundation of the mark price. The system selects spot prices from several globally recognized, highly liquid, and trustworthy major exchanges.
(2) Funding Rate (Primarily for Perpetual Contracts)
Perpetual contracts have no expiration date. To ensure the contract price closely tracks the spot price, a "funding rate" mechanism is designed.
The calculation of the mark price incorporates the expectation of the funding rate, allowing it to predict the impact of funding rates on the contract price and thus more accurately anchor to the spot index price.
(3) Mark Price Calculation Formula
Mark Price = Median (Funding Rate Basis Fair Price, Depth-Weighted Fair Price, EMA Latest Price)If one price is excluded:
Mark Price = (Price a + Price b) / 2
If two prices are excluded:
Mark Price = Price x
III. The Core Role of the Mark Price
The design of the mark price primarily serves risk control, with its key functions reflected in the following three aspects:
🛡️ Preventing Malicious Liquidations
This is the most critical and important role of the mark price.
Problem:
Without the mark price, the platform would use only the market price to calculate profits, losses, and liquidations. In a smaller exchange with poor liquidity, a large trader ("whale") could use a small amount of capital to suddenly crash or pump the market, causing extreme volatility in the market price and forcing the liquidation of large numbers of high-leverage users' positions. The price would then quickly return to normal, allowing the manipulator to profit. This behavior is known as "liquidation hunting" or "liquidation attack."
Solution:
Using the mark price as the trigger standard for liquidations. Since the mark price is based on spot prices from multiple major exchanges, it is nearly impossible to manipulate by a single entity. It is extremely difficult for a manipulator to simultaneously manipulate spot prices across all major exchanges. This greatly protects ordinary traders and ensures the fairness of liquidations.
📊 Fair Calculation of Unrealized Profit and Loss
Whether your position is profitable or loss-making should not fluctuate drastically due to temporary price abnormalities on a single exchange. The mark price provides a stable and fair benchmark for calculating your floating profits and losses.
Unrealized P&L = (Mark Price - Your Average Entry Price) × Contract QuantityThis calculation better reflects the true market value of your position rather than short-term market noise.
⚠️ Serving as the Benchmark for Triggering Liquidations
💡 Key Takeaway
The mark price system is designed to create a fair, transparent, and manipulation-resistant trading environment. By using aggregated data from multiple major exchanges, SunPerp ensures that your trading experience is protected from artificial price manipulation and provides accurate position valuations based on true market conditions.