Perpetual Contracts and Futures Exchange System Development Guide: Rules and Strategies

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Trading Rules

Contract Design

  1. Contract Underlying Assets

    • Commonly include cryptocurrencies like Bitcoin (BTC) or Ethereum (ETH). Developers must align tradable assets with market trends to attract users.
    • Diversify offerings with stablecoin-crypto pairs or other innovative combinations.

  2. Contract Multiplier

    • Determines the contract’s value relative to the underlying asset price. Example: A Bitcoin multiplier of 10 at $50,000 yields a $500,000 contract value.
    • Balance liquidity and trader capacity while mitigating extreme volatility risks.

  3. Quotation Units

    • Specify pricing precision (e.g., BTC/USD to 2 decimal places) based on market conventions and trading needs.

Trading Hours

  1. 24/7 Continuous Trading

    • Systems must support uninterrupted operation, ensuring stability during high-frequency trading sessions.

  2. Emergency Suspensions

    • Implement protocols for halting trades during extreme volatility or technical failures, with user alerts and fair market resumption.

Order Types

  1. Market Orders

    • Execute instantly at the best available price. Optimize speed while minimizing slippage risks.

  2. Limit Orders

    • Traders set specific prices; orders execute only when met. Prioritize FIFO (First-In-First-Out) matching.

  3. Stop-Loss/Take-Profit Orders

    • Automatically trigger to limit losses or lock profits. Ensure precise execution thresholds.

Margin and Leverage Rules

Margin Types

  1. Initial Margin

    • Typically 5%–10% of contract value, varying by asset risk and market conditions.

  2. Maintenance Margin

    • Minimum balance to avoid liquidation. Trigger margin calls or forced closures if breached.

Leverage Options

  1. Variable Leverage (1x–100x+)

    • Offer tiers with clear risk disclosures. Adjust dynamically during high volatility (e.g., reduce max leverage).

Settlement and Liquidation

Funding Rate Mechanism

  1. Rate Calculation

    • Formula: (Contract Price − Spot Price) / Spot Price × Time Factor.

  2. 8-Hour Cycles

    • Settlements occur at 00:00, 08:00, and 16:00 UTC, transferring fees between long/short positions.

Forced Liquidation

  1. Triggers

    • Margin depletion or excessive loss relative to equity.

  2. Process

    • Prioritize high-loss positions; execute via market/limit orders swiftly.

Risk Management

Price Limits

  1. Circuit Breakers (±10%–20%)

    • Halt trading temporarily upon hitting limits, allowing only closings.

Position Limits

  1. Per-User Caps

    • E.g., 1,000 BTC contracts/user to prevent market manipulation.

  2. Aggregate Controls

    • Monitor total open interest; restrict new positions if thresholds exceed.

Technical Development

Security Protocols

  1. AES-256 Encryption

    • Safeguard user data and transactions end-to-end.

  2. Multi-Factor Authentication (MFA)

    • SMS, Google Authenticator, and real-time anomaly detection.

Performance Optimization

  1. High-Concurrency Architecture

    • Deploy distributed systems, caching, and asynchronous processing.

  2. Low-Latency Infrastructure

    • Edge servers and optimized networks for sub-millisecond execution.

👉 Explore advanced trading strategies

FAQ

Q: What’s the difference between perpetual and futures contracts?
A: Perpetuals lack expiry dates and use funding rates to track spot prices, while futures settle at predefined dates.

Q: How does leverage amplify risks?
A: Higher leverage increases potential gains/losses. A 10x leverage means a 10% price swing can liquidate positions.

Q: Can funding rates be negative?
A: Yes, indicating shorts pay longs—common during bearish sentiment.

For further insights, see our guide 👉 Mastering crypto derivatives.