According to an exchange notice published on Tuesday, Binance plans to change the way it calculates commodity-based perpetual futures benchmark prices during non-business hours, which may impact margin and liquidation levels during weekends, holidays, and maintenance periods. This update will take effect on May 8th at 9:00 PM UTC.
The exchange plans to replace its current fixed pricing model with a commodity-based traditional finance (TradFi) perpetual contract order book EWMA model. EWMA (exponentially weighted moving average) uses order book data that is smoothed over time rather than relying on a fixed reference price during periods of low activity.
Binance said the changes will apply to daily maintenance windows as well as weekends and holidays, when trading activity is typically reduced.
A Binance spokesperson told Cointelegraph that fixed mode was designed for periods of low liquidity, but with increased trading volumes and a deeper order book, the move to more flexible price discovery is a “natural progression” and reflects the growth of TradFi’s perpetual trading business.
This change applies to commodity-based TradFi perpetual contracts, including gold, silver, platinum, palladium, copper, crude oil, Brent crude oil, and natural gas contracts. This also applies to future commodity-based TradFi perpetual trades listed on Binance Futures.
EWMA model as an alternative to fixed pricing
It will also apply to similar product-based TradFi perpetual contracts that will be listed in the future. The index price generated based on this method is used to calculate margin and liquidation levels. This means that traders may see changes in how positions are marked and how after-hours liquidations are triggered compared to the previous Fixed Mode system.
A spokesperson said the exchange will not change its weekend margin requirements, but clearing actions outside of regular hours will be more consistent with crypto perpetual trading, and pricing will be tied more directly to the exchange’s liquidity. The EWMA model also smoothes the transition between after-hours trading and regular trading to maintain price continuity.
Updates to the commodity-based TradFi Perp price index calculation mode. sauce: Binance
industry pricing model
Other crypto derivatives exchanges, including Bybit’s index pricing framework, have adopted index pricing methodologies that incorporate multiple market inputs and order book weighting factors to reduce clearing distortions during times of low liquidity or high volatility.
Bybit’s model aggregates prices from multiple external spot exchanges and applies a weighting mechanism to smooth out short-term fluctuations.
A Binance spokesperson said the change only applies to commodity-based TradFi perpetual contracts where the underlying market closes outside of normal hours. Perpetual cryptocurrencies continue to be traded and the existing framework remains appropriate. Stock-based TradFi perpetual contracts will continue to use the current fixed pricing method for the time being.
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