Position Change Fee
Position change means any activity that changes the value of positions, including open, close or liquidate positions. Position change cause changes in naked positions.
The hAMM system has a special Position Change Fee (PCF) mechanism rewarding position changes that decrease naked positions, and discouraging position changes that increase naked positions.
When traders increase the naked positions of a certain derivative, they will pay extra PCF to the system, and on the flip side, receive PCF from the system.
The existence of PCF will encourage arbitrageurs to earn risk-free profit as follows: open a position under Derify protocol that is opposite to the naked position, then open a hedged position in an external market.
Such action is called "naked position arbitrage", which effectively takes naked position to external markets, and decreases the risk exposure of the system.
Liquidity Depth Factor
PCF Rates
naked position is long
PCF is positive
opening long position/closing short position shall pay PCF payment
opening short position/closing long position shall receive PCF rewards
naked position is short
PCF is negative
opening short position/closing long position shall pay PCF payment
opening long position/closing short position shall receive PCF rewards
PCF Cost for A Transaction
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