# Perpetual Futures

## Overview

World's Perpetuals Market uses a **direct counterparty system** (no pools).

* A trader may be **long or short** on a pair, but not both.
* Opposite-direction trades reduce the existing position (partial or full), requiring settlement and adjustment, called a **True Up**.
* The market computes a **funding rate** every 8 hours.
* All orders must be an **integer multiple of the order size unit** (to avoid dust positions).

## Funding Rate

* The **funding rate** is exchanged every **8 hours** (00:00, 08:00, 16:00 UTC).
* Only positions still open at these times are charged/credited.
* The funding fee is:

$$
\text{Funding Fee} = \text{Notional Value} \times \text{Funding Rate}
$$

where:

$$
\text{Notional Value} = \text{Mark Price} \times \text{Position Size}
$$

* Positive rate → **longs pay shorts**
* Negative rate → **shorts pay longs**
* The exchange **does not charge additional fees** on funding transfers.

#### Formula & Rationale

Funding rates align perp prices with expected future prices.

* Predicted future price in 8 hours:

$$
\text{Predicted Future Price} = \text{Order Book Mid-Price} \times (1 + \text{Current Funding Rate})
$$

* Alternatively, a trader may pick a funding rate and compute:

$$
\text{Computed Mid-Price} = \text{Mark Price} + \text{Mark Price} \times (\text{Trade F. Rate} - \text{Current F. Rate})
$$

#### Funding Rate Calculation (World)

* Calculated from executed trades during an **8-hour window**, offset by 30 minutes:
  * **00:00 UTC** → trades from 15:30 – 23:30 UTC
  * **08:00 UTC** → trades from 23:30 – 07:30 UTC
  * **16:00 UTC** → trades from 07:30 – 15:30 UTC
* During the window, compute:

$$
\text{Total Adjusted Notional} = \sum \frac{\text{Trade Quantity} \times \text{Order Book Mid-Price}}{2 \times \text{Mark Price}}
$$

$$
\text{Total Quantity} = \sum \text{Trade Quantity}
$$

* New rate:

$$
\text{New Funding Rate} = \text{Current Funding Rate} + \Bigg(\frac{\text{Total Adjusted Notional}}{\text{Total Quantity}} - 0.5\Bigg)
$$

* **Clamp**: Change per period is limited to ±0.005%.

### True Up

A **True Up** adjusts positions in a financially neutral way for easier accounting.

1. You can see this button in the Actions menu in the Positions tab.
2. Reset position start time to **now**.
3. Adjust trade price to the **new trade price** (for fills) or **mark price** (for manual true up).
4. Immediately settle any financial difference.

* If the owing side lacks base currency, a **24h interest-free loan** is created.
* Unpaid loans after 24h → account becomes **liquidation-eligible**.
* Either counterparty may trigger a true up anytime.

**Example**

* Position: long 2 ETH at $3000 vs short at 07:45.
* At 10:00, mark price = $3010, funding rate = 0.01%.
* Settlements:

Price move:

$$
2 \times (3010 - 3000) = 20
$$

Funding:

$$
2 \times 0.0001 \times 3010 = 0.602
$$

Net:

$$
20 - 0.602 = 19.398
$$

So the short pays the long **$19.398**.

## Contract Settlement

Settlement occurs when a trader trades **opposite their current position**.

* WCM uses **LIFO (Last In, First Out)** settlement rules.
* Positions touched in settlement are first **Trued-Up**, then adjusted.
* Positions with same **start time and price** can be summed.

**Example 1**

Initial:

| Long | Short | Qty |
| ---- | ----- | --- |
| Fred | Wilma | 2   |

Fred shorts 7 ETH vs Barney.

Result:

| Long   | Short | Qty |
| ------ | ----- | --- |
| Barney | Wilma | 2   |
| Barney | Fred  | 5   |

**Example 2**

Initial:

| Long   | Short | Qty |
| ------ | ----- | --- |
| Fred   | Wilma | 11  |
| Barney | Wilma | 3   |

Barney goes long 7.5 ETH → matched: 5 vs Fred, 2.5 vs Wilma.

Result:

| Long   | Short | Qty  |
| ------ | ----- | ---- |
| Fred   | Wilma | 6    |
| Barney | Wilma | 10.5 |

***

### Fees

* **Charged on notional value** at trade execution.
* **In base currency** (not quote).
* Applied pro rata at trade price.
* Fees are **lower than spot markets** (because perps are leveraged).

**Example**

* ETH/USD perps fee schedule:
  * Maker: 0.005%
  * Taker: 0.01%
  * Fee cap: $2

Trade: 10 ETH @ $3000 (notional = $30,000).

* Buyer fee =

$$
\min(2, 30000 \times 0.00005) = 1.5
$$

* Seller fee =

$$
\min(2, 30000 \times 0.0001) = 2
$$

## Capital Requirements

### Takers

* Must cover **fees immediately**.
* Portfolio must remain **positive in risk-based valuation**.
* Example: If token risk parameter = 10%:

$$
\text{Required Collateral} = \text{Quantity} \times \text{Price} \times 0.1
$$

* Collateral can be cross-asset, but **base currency is recommended** to handle True Ups.

### Makers

* Must have:
  * **Fees in base currency**.
  * Extra collateral if trade price < mark price:

$$
\text{Required Collateral} = \text{Quantity} \times (\text{Mark Price} - \text{Trade Price})
$$

* If unavailable, order is canceled at match attempt.

### Maintenance & Requirements

* After a position is established, the trader must maintain **positive portfolio valuation**.
* Simplified rule of thumb:

$$
\text{Required Collateral} \approx \text{Risk Parameter} \times \text{Quantity} \times \text{Price}
$$

* For 10% risk parameter → keep \~10% of notional on hand.
* P\&L accrues with price movement and must be factored in.

***


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