Fees & Price Impact
Entry/Exit fees
Entry/Exit Fees are charged proportionally to the position size when a position is opened or closed. The maker fee rate is applied when a trade reduces the Market Skew, whereas the taker fee rate is applied when it increases the Market Skew.
Crypto
| Token | Maker Fee (%) | Taker Fee (%) |
|---|---|---|
| ETH | 0.03 | 0.06 |
| SOL | 0.04 | 0.08 |
| SUPRA | 0.08 | 0.16 |
| BTC | 0.03 | 0.06 |
| MONAD | 0.04 | 0.08 |
| LINK | 0.04 | 0.08 |
Market Skew is defined as Long OI - Short OI for each pair.
Example
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Let’s say the Long OI is $1,500,000 and Short OI is $1,000,000 for a crypto pair. The Market Skew for the pair is +$500,000.
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When a trader opens a new $500,000 long position, the taker fee rate will be applied as it increases the Market Skew (+$500,000 -> +$1,000,000), thus the charged amount is $500 (=$500,000 * 0.1% taker fee) as the entry fee.
-
When a trader opens a new $500,000 short position, then the entry fee of $250 (=$500,000 * 0.05% maker fee) is charged as it decreases the Market Skew (+$500,000 -> $0).
Distribution of Entry/Exit Fees
Entry and exit fees are collected and distributed as follows: 50% to the DXLP, 30% to the Protocol Fund, and 20% to the Dev Fund. Specific ratios may change temporarily for risk management purposes.
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DXLP (70%): The fees distributed to liquidity providers help offset their risk and incentivize additional liquidity. A higher liquidity pool enhances the liquidity and stability of the protocol.
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Protocol Fund (12%): The portion allocated to the Governance Fund is used to reward $DXL staking participants. The remaining funds are held in the protocol treasury to support future development and provide insurance.
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Dev Fund (18%): The share directed to the Dev Fund is used for operational expenses, protocol development and growth.
Price Impact
To balance the total open interests of long and short positions on the protocol, price impact is applied to the index price:
Market Price = Index Price + Price Impact
Market Price: The current price at which the asset is being traded.
Index Price: The reference price of the asset, provided by Supra Oracle Network, a decentralized oracle network.
Note that price impact can work in the trader’s favor, as illustrated in the Example #1 below.
Example #1
Current BTC/USD price: $25,000
Long open interest in BTC/USD: $1,000,000
Short open interest in BTC/USD: $1,800,000
Market skew: -$800,000
BTC/USD skewFactor: 2*10^9
If trader opens a new $200,000 long position of BTC/USD, then the price impact would be -0.00035
(=0.5 * {-800,000/ (2*10^9) -600,000 / (2*10^9)})
The trader would enter at $24,991.25 (-0.035%)
Price spread
A small spread may be applied to certain trading pairs, particularly those with lower liquidity. This spread (typically under 0.02%) is applied to the index price provided by the Supra Oracle at the time of order execution. The current spread for a trading pair is displayed in a tooltip when hovering over the price on the Trade page.
These spreads are dynamically adjusted based on current market volatility and the available liquidity for the specific asset. This dynamic adjustment helps to ensure competitive pricing while accounting for market conditions.
Funding Fee
Funding fee serves to balance the total open interests of long and short positions on the protocol. If there are more users opening Long positions (longing) than the Short ones (shorting), the users who long pay a certain portion of the fees to the users who short. The cost corresponding to these fees is paid in the form of a Funding Fee.
When the funding rate is positive (+), there are more long trades on the protocol and the users who long effectively cover the funding fees for the users who short. When the funding fee is negative (-), it works in reverse to the above situation.
Velocity based funding fee
As opposed to the traditional model where the funding rate is determined by the market skew, in our velocity-based funding rate model, the market skew determines the velocity at which the funding rate changes. The goal of the velocity-based funding rate mechanism is to make the funding rate more predictable for those who are interested in arbitraging the funding fee.
Here’s the formula used to calculate the funding rate on position updates: