💸Forex
Avantis offers 10 forex pairs at launch.
Types of Fees
| Fee / Incentive | Value |
|---|---|
1 bp - 5 bps, based on long-short skew | |
3 bps | |
10%-30% of net PnL, based on long-short skew | |
Based on skew and utilization | |
1 bp |
Dynamic Opening Fee: [0.01% - 0.05%] * Position Size
Opening fee applies on the total position size of a leveraged trade. An example, if a trader puts up $100 of collateral at a 30x leverage, then the total position size would be $3,000. The opening fee would be deducted from the position size, e.g $0.3 (0.01% of $3,000). $99.7 is now the collateral value of the trade.
Dynamic Opening Fee: A Skew-Adjusted Mechanism
In an effort to optimize the fee structure for market participants, we have introduced a skew-adjusted dynamic opening fee. This fee is designed to incentivize balanced trading and mitigate systemic skew. Specifically, traders on the less skewed side of the market will benefit from discounted fees.
The fee is determined according to skew:
| Long Skew | Short Skew | Long Opening Fee (bps) | Short Opening Fee (bps) |
|---|---|---|---|
1 | 0 | 5 | 1 |
0.9 | 0.1 | 4.5 | 1.5 |
0.8 | 0.2 | 4 | 2 |
0.7 | 0.3 | 3.5 | 2.5 |
0.6 | 0.4 | 3 | 3 |
0.5 | 0.5 | 3 | 3 |
0.4 | 0.6 | 3 | 3 |
0.3 | 0.7 | 2.5 | 3.5 |
0.2 | 0.8 | 2 | 4 |
0.1 | 0.9 | 1.5 | 4.5 |
0 | 1 | 1 | 5 |
Closing fee: 0.03% * Adjusted Position Size
Closing fee applies to the adjusted position size of a leveraged trade, where:
Adjusted Position Size = Total Position Size + Accrued PnL - Accumulated Margin Fee
Most margin-based perpetual protocols deduct closing fee upon opening an order, however the reason why we use the adjusted position size is to help traders save fees when they are in a loss, and protect LPs when traders are in profit. In the above example, if a trader puts up $100 of collateral at a 30x leverage, then the total position size would be $3,000. After deducting the opening fee (and assuming no change in the price of the underlying asset), the leveraged position size with the new collateral is $2,910. Let's say accumulated margin fee on the position is $10. Hence, the closing fee is (2,910 - 10) * 0.03% = $0.87
Fixed Spread: 0.01%
Forex markets, especially for major pairs (e.g GBP-USD, JPY-USD, EUR-USD) are generally very liquid, while being less volatile than the crypto market. Hence, unlike cryptocurrencies (where the spread is dynamic), we only charge a fixed spread of 0.01% for each forex trade, to account for any minor (and unfavorable) price movements that occur right between a trade order being sent, and it being executed onchain. This spread is only charged upon opening an order, not closing.
Dynamic Margin fee
A margin fee applies to the collateral value of a position each block (and is displayed in a hourly format on the website). This is to make sure traders do not borrow most of the vault's capacity, and also leave room for other traders to take part in trading against the vault. It is also dependent on how skewed the positioning is in a particular asset, with a higher fee for traders on the skewed side (eg if skew is 90-10 long-short, longs will pay a higher margin fee). Hence, it is both a risk management measure, as well as a fair parameter that allows for several traders to utilize the platform.
The formula for determining the fee at any moment will be based on several factors. It can be summed up as:
Hourly Margin Fee = Base Fee* [(1/(1- Blended Utilization ratio * Blended Skew Ratio))-1]
Base Fee: A fixed fee at 0.0015% / hour
Blended Utilization= 0.75 *Category Utilization + 0.25* Asset Utilization
Asset Utilization= USDC Borrowed / USDC Limit for the Specific Asset
Category Utilization= USDC Borrowed / USDC Limit for the Defined Category
Blended Skew = 0.75 *Category Skew + 0.25* Asset Skew
Long Asset Skew Ratio= Long Open Interest for the specific asset /( Long Open Interest + Short Open Interest for the specific asset)
Long Category Skew Ratio= Long Open Interest for the whole category/( Long Open Interest + Short Open Interest for the whole category)
Example: The open interest on long positions for EUR-USD is $10,000, and open interest for short positions for EUR-USD is $500 while long and short open interests for FX as a category are $15000 and 2000$ respectively. FX category OI limit is $150,000 and EURUSD OI limit is $100,000. In this case, the blended utilization ratio is 0.75*(15000+2000)/150000 + 0.25*(10000+500)/100000 =0.153 and the blended skew ratio is 0.75*(15000/(15000+2000)) + 0.25* (10000/(10000+500)) = 0.899, or 89.9% long and 10.1% short. Hence, the margin fees paid by longs would be 2.11% annualized (0.024 bps/hour), while shorts would pay 0.21% annualized (0.0023 bps/hour).
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