Crypto Facilities, a Financial Conduct Authority-regulated trading platform, recently announced that they would be launching new futures contracts for Bitcoin [BTC], Ethereum [ETH], Litecoin [LTC], Bitcoin Cash [BCH] and XRP. These contracts will also be perpetual, they stated.
The pairs for the contracts are BTC/USD, ETH/USD, LTC/USD, BCH/USD, XRP/USD and XRP/BTC. All contracts except the XRP/BTC are inverse perpetual futures, with the remaining contract being a vanilla perpetual futures one.
To understand what a perpetual futures contract is, one must understand what a futures contract is. They are a kind of derivative product that are represented by a contract to trade a commodity or asset at a specified time in the future.
However, with perpetual futures contracts, there is no expiry or settlement. Instead, there is a settlement process that occurs every 4 hours on the Crypto Facilities platform. This applies funding to anchor the spot value, that is the price of the collateralized asset according to underlying spot markets, to the Index used to pay out the contract itself.
The rate for the next period of the settlement process is calculated over the current period. The trader needs to terminate his/her position in order to stop receiving revenue from the futures contract. The payouts are continuous, based on the funding rate that was set at the end of the funding interval prior to that.
The positions will send and receive funding while open in the contracts. All the contracts are cash-settled and will not involve the warehousing of the underlying assets. All of the funds are denominated in 1 USD as the contract size, except the XRP contracts, which are denominated in XRP.
As the futures contracts do not require the traders to post 100% of the collateralized assets as a margin, they can trade with a leverage. Leveraged allows traders to only set a percentage of the asset as a margin, and thus trade for 10x or 100x the leveraged amount.