Advertisers can reduce losses caused by market fluctuations by setting a premium on the Index Price to adjust for advertising costs. Therefore, in order to better serve advertisers, we have updated our price sources to obtain a more stable Price Index.
The Price Index is a comprehensive market reference price. The Price Index is obtained by referring to prices reported by a group of major spot exchanges and their weighted average trading volumes.The reference spot exchanges include: Bitfinex, Binance, Huobi, OKEX, Bittrex, and HitBTC.
Binance applies additional protections to safeguard against poor market performance during spot exchange outages or connectivity issues:
- Single Price source deviation: If the latest price of a specific exchange deviates by more than 3% from the median price of all sources, the value will be immediately capped at either 1.03 times or 0.97 times the median price, depending on whether the deviation is above or below the median. For example, if the median price of BTCUSDT index on Exchange A is 20,000 USDT and the price deviates by +7%, it will be capped at 20,600 USDT (20,000 * 1.03). Conversely, if the deviation is -6%, the accounted value will be 19,400 USDT (20,000 * 0.97). This adjustment will occur immediately after the spot price exceeds this price deviation threshold. The exchange-computed price value will be readjusted to its original value once the price value falls back within the 3% deviation threshold from the median price of all price sources. However, this rule doesn’t apply to certain designated indexes (Eg: BTC & ETH indexes are 1%).
- Exchange connectivity issues: If Binance is unable to access data from an exchange or the exchange has not updated its trading data within the last five minutes, the weight of that exchange will be set to zero in the weighted average calculation.
- The “Last Price Protected” mechanism: When Binance cannot obtain a stable reference data for the Price Index and the Mark Price, it uses the “Last Price Protected” mechanism. In this case, the Price Index is temporarily updated based on the latest transaction price of the contract within a certain limit as a reference for the Mark Price to calculate unrealized profit and loss (PnL) and the liquidation call level. This helps prevent unnecessary liquidations until the situation returns to normal.
Note:
- Cross rate: For underlying assets with no direct quotes, Binance will use the synthetic price to calculate the cross-exchange rate as the synthetic index. For example, LINK/USDT can be calculated using LINK/BTC and BTC/USDT.
- Price Index updates: Binance reserves the right to update the Price Index references from time to time without prior notice.
The Price Index can be regarded as a Fair Spot Price. The advertising price is calculated using the formula: Trading price = Current Index Price × Conversion ratio × Price fluctuation index.
