Introduction: The MEXC Perpetual Swap

Brief Introduction

A perpetual contract is a cryptocurrency derivative that is similar to leveraged spot trading. Users can make a profit from the rise/fall of the cryptocurrency price by going long or selling short, based on their own judgment on the changes in the price of the cryptocurrency. However, it’s still a little different from traditional futures:

It has no expiry date which means you can hold a position for as long as you like. 

To ensure that the contract price is close to the underlying index price (i.e spot price), the perpetual contract uses the funding cost mechanism to guarantee that the price follows the underlying asset price.

MEXC provides users with the Inverse Swap and USDT Swap.

Market Mechanisms: The Swap

When trading perpetual swaps, a trader needs to be aware of the following:

1. Fair Price: Perpetual contracts adopt fair price marking. The fair price determines unrealized PNL and liquidation prices.
2. Index Price: The index price is a composite price index obtained by reference to the prices of the major mainstream exchanges, based on a weighted average of their prices, representing the market spot price of the underlying asset.
3. Initial Margin: Indicates the amount of margin required to open a position. The leverage used by the trader is inversely proportional to the initial margin required to open a position. The higher the leverage, the lower the initial margin required.
4. Maintenance Margin: The minimum level of margin required to maintain a position.
5. Funding Fees: Funding fees are periodically settled between the traders in the long and short position every 8 hours. If the funding rate is positive, then the longs will pay the shorts. This relationship is reversed if the funding rate is negative.

Note: You will only be entitled to receive or obliged to pay the funding rate if you have an open contract position at specific Funding Timestamps.

Traders can learn the current funding rate for a contract on the “Trade” tab under [Funding Rate].

Funding Costs

The Funding Costs is the core operating mechanism of the MEXC Futures

The Funding Timestamps are as follows : 04:00 (UTC), 12:00 (UTC), 20:00 (UTC)

The value of your position is independent of your leverage multiplier. For example: if you hold 100 BTC/USDT contracts, you will receive or pay for funds based on the value of these contracts instead of how much margin you have allocated to this position.

Funding Cost Limits

MEXC caps the funding cost on its perpetual swaps to allow traders to maximize their leverage. This has been done in two ways.

The absolute upper limit of the funding cost is 75% of the (initial margin rate- maintenance margin rate).

For example, if the initial margin rate is 1%, the maintenance margin rate is 0.5%, then the max. funding cost is 75% * (1%-0.5%) = 0.375%.

Funding Rate: Additional Information

MEXC does not take a cut of the funding rate. The funding rate is exchanged directly between traders in the long position and traders in the short position.

Fee

The MEXC trading fees are as follows (normal user):

Maker fee    Taker fee

0.0                 0.06%

Additional Definitions:

Wallet balance =  Total deposit amount - Total withdrawal amount + Total realized PNL

Realized PNL = Total PNL of closed positions - Total trading fees - Total funding cost

Total Equity = Wallet balance + Unrealized PNL

Position Margin = Funding for position, generally including all the user's positions (cross or isolated). Please note that the position margin of MEXC futures only includes the traders’ isolated margin and the initial margin of the cross position, excluding the floating margin under cross positions.

The margin of open orders = all frozen funds of open orders

Available margin = Funds available for users to open positions

Unrealized PnL = sum of all floating profits and losses