Fees
Fee Types on Lynx
Over the lifecycle of a trade, there are a few different fees that might apply to a trader:
Opening Fee
Traders are charged an opening fee which is deducted from their initial collateral amount. The opening fee for a trade depends on the collateral asset and traded instrument selected and is calculated as a percentage of the total trade size.
Current opening fees for each collateral asset are listed at the bottom of the trading panel:
For example, assume we're opening a position using 100 DAI initial collateral at 20x leverage and an opening fee of 0.10%.
Pre-Fee Position Size: 2000 DAI = 100 DAI initial collateral * 20x leverage
Opening Fee: 2.0 DAI = 2000 DAI pre-fee position size * 0.10% opening fee
Position Collateral: 98 DAI = 100 DAI initial collateral - 2.0 DAI opening fee
Position Size: 1960 DAI = 98 DAI position collateral * 20x leverage
Artificial Spread
The artificial spread depends on the traded instrument selected and is derived by aggregating that instrument's spread across leading spot markets. The artificial spread is then applied to the current price of the instrument (as reported by the price oracle) to mimic the entry price that would be received on an order-book exchange. Depending on whether the position is long or short, the artificial spread will make the entry price either higher or lower, respectively, than the price initially reported by the oracle.
As the artificial spread uses live data and real market conditions, it is adjusted periodically on Lynx to provide the most current value. Smaller and less liquid instruments receive a higher spread, while large-cap instruments with deep liquidity would receive a lower spread.
For example, assume the price for ETH/USD (as reported by Lynx's price oracle ) is $1500. If the spread for ETH across leading spot markets is 0.02%, the entry price given to traders going long on ETH would be $1500.30 ($1500*100.02%) and those going short would be $1499.70 ($1500*99.98%).
Note: When exiting a position, the price reported by the oracle is used as is with no artificial spread applied.
Funding Rate
The funding rate is a fee paid by traders on the heavier exposed side of an instrument and received by traders on the lesser exposed side, less a small amount that goes to a reserve fund. For example, if 70% of open interest for BTC/USD is in long positions while 30% is in short positions, traders who are long BTC/USD will pay the funding rate; a portion of this amount will be diverted to the reserve fund, while the remainder will be received by traders who are short BTC/USD.
The amount of funding paid for each tradeable instrument depends on how great the imbalance is between open interest in long and short positions. This imbalance is referred to as the skew, where generally a greater skew correlates with a higher funding rate paid. Skew is defined as:
By incentivizing the lesser exposed side, the funding rate encourages balanced open interest between longs and shorts on any given instrument. This is an important mechanism in reducing LPs' exposure to P&L, as every winning trade (ie. debt to the liquidity pool) is approximately matched with a losing trade of similar size (ie. credit to the liquidity pool).
The funding rate is displayed on the UI in the following manner:
A negative, red value means the position is costing you money.
A positive, green value means you are earning money from the position.
Borrow Rate
The borrow rate is a dynamic fee continuously applied to traders' positions for the time it remains open and is charged against the amount of funds the trader is utilizing in their trade:
For example, a trader with $100 of collateral and a Take Profit of 250% will pay the borrow rate on the utilized amount of $250. This fee is paid by traders and goes towards liquidity providers.
It is important to note that the borrow rate is floating and not fixed, with rates getting updated on a per-block basis. The borrow rate depends on the utilization of the liquidity pool and follows a single kink model, with higher pool utilization resulting in higher rates, acting as a strong incentive to attract additional liquidity.
The current borrow rate is displayed on the UI, expressed as a percentage paid by each trader:
Closing Fee
Traders are charged a closing fee once their position has been closed, be it manually, by TP/SL, or by liquidation. Like the opening fee, the closing fee varies per collateral asset and traded instrument used and is calculated as a percentage of the total trade size at the time of closing:
All Assets
0.09%
For example, assume we're closing a position that used 100 DAI initial collateral at 20x leverage, and there's a closing fee of 0.10%. As calculated above, the position collateral is 98 DAI after the opening fee.
Position Size at Closing: 1960 DAI = 98 DAI position collateral * 20x leverage
Closing Fee: 1.96 DAI = 1960 DAI * 0.10% closing fee
Liquidation Fee
As explained in Liquidations, a trade is eligible for liquidation when its losses and fees - as calculated by Net P&L - reach a threshold equal to 85% of its position collateral. At this point, the position will be closed and the remaining collateral will be taken as a fee, effectively resulting in a 15% fee on the total collateral.
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