BYDFi's index price, explained

The image is the article's own banner from BYDFi's help center, the mascot at a whiteboard. Just illustration.

What the index price is

It's a blended spot price pulled from several large spot exchanges, so no single venue can push it around. BYDFi treats it as the fair spot price and uses it to build the mark price, which is what unrealized PnL is calculated from.

One detail people miss: your realized PnL is based on the actual price you close at, not the index or mark.

The three protections

• Single source deviation. If one exchange's latest price is more than 1% away from the median of all sources, its weight drops to zero
• Multiple source deviation. If more than one exchange is off by more than 5%, the index stops using the weighted average and uses the median of all sources instead
• Last trade price protection. If the reference data becomes unreliable, for example on a contract with only one index component, BYDFi temporarily builds the mark price from the contract's own last price plus a limit, to avoid liquidations caused by a broken feed

BYDFi also says it may change which sources make up the index during extreme market conditions.

A quick illustration (example numbers, not live data)

Say five sources have a median of $100.00 and one of them prints $101.50 on a sudden wick. That's 1.5% off the median, so it gets zero weight and the index barely moves. A wick on one venue shouldn't liquidate you elsewhere.

Why it matters for your position

• Liquidation and unrealized PnL follow the mark price, which is built on the index, not on one exchange's last trade
• A spike on the order book that the index doesn't confirm won't move your margin ratio the same way
• When you close, what counts is your fill

If you've ever wondered why a long wick didn't take out your liquidation level, this is usually why.