Pre-Launch Futures

Pre-Launch Futures

Pre-Launch Futures (PLF) enable investors to speculate on assets before their public release, addressing the gap where trading activity is typically unavailable.

How do Pre-Launch Futures Work?

For all futures products, a mark price is essential for tracking liquidation, funding fees, and - if applicable - settlement. However, as spot prices for the underlying assets of PLF are unavailable before public launch, traditional oracle feeds cannot be used. PLF markets are designed to be traded near the asset's public launch, allowing the mark price to align with the spot price once trading begins.

Before this point, there are two methods for crafting a mark price. One is simply taking the price of a pre-launch product on another popular exchange. The other is by using a 24-hour exponentially weighted moving average (EWMA) of the last day’s minutely last traded prices as the interim mark price, ensuring accurate liquidation tracking and settlement preparation. A more detailed explanation of the latter follows.

Mark Price Mechanism

The mark price is based on two price feeds:

1. EWMA price feed

2. CEX API price feed (e.g. Binance, OKX, or Bybit)

During the various phases of the timeline, a different price feed is used:

• Before asset is listed on CEX ⇾ EWMA price feed

• Within 24 hours of asset is listed on CEX ⇾ EWMA price feed

• 24 hours after asset is listed on CEX ⇾ CEX API price feed

• Shortly thereafter ⇾ decentralized price feed (switch via governance proposal)

This design prevents a sudden distortion in mark price if the difference between EWMA price feed and CEX API price feed is great.

The EWMA price is calculated as follows:

$$\text{Price}_t = \sum_{i=0}^{1439} \left[ (t - i_{\text{minutes}} < t_{\text{init}} \, ? \, \text{assumed price} : \text{last traded price}_{t - i_{\text{minutes}}}) \cdot e^{-\frac{i}{1440}} \right] \cdot \frac{1 - e^{-\frac{1}{1440}}}{1 - e^{-1}}$$

Where:

• t_init is the time of the first trade in the underlying market.

• assumed price is the price assumption of the underlying asset. This price is used when there is no last traded price 24 hours prior the first trade in the underlying market. In other words, after the first 24 hours, if the underlying market has traded already, then the assumed price would no longer have an impact on the mark price.

• last traded price is the last price traded in the underlying market.