Dynamic fee curve

Every trade pays the base fee. A trade that increases the imbalance between long and short open interest on an asset also pays a skew charge. The charge rises with the square of how close the resulting skew is to its cap. It is paid 100% to the Kimp Pool, which carries the imbalance.

Trades that reduce the imbalance pay only the base fee. This makes the balancing side of the market cheaper than the crowded side, without paying anyone a rebate.

Definitions#

• Skew is the net open interest on an asset: long notional minus short notional, in USD.
• Skew cap is 50% of that asset's OI cap. See Skew limits and OI caps.
• Skew after is the skew that would result from the trade.

Formula#

if |skew_after| > |skew_before|:    skewCharge = 0.10% × (|skew_after| / skewCap)^2else:    skewCharge = 0total fee = notional × (baseFee + skewCharge)

The base fee is 0.05% of notional on open and on close. The skew charge is a rate applied to the full notional of the trade. It ranges from 0 to 0.10%. A trade that would take |skew_after| above the skew cap reverts, so the charge never exceeds 0.10%.

The rule applies to closes as well as opens. Closing a short on an asset that is already net long increases the long skew, and pays the charge. Settlement at expiry never pays a skew charge.

Worked table#

Skew utilization is |skew_after| / skewCap. The fee columns are for a trade of 10,000 USD notional.

The curve is flat near zero and steep near the cap. At half the cap a trade pays a quarter of the maximum charge. The last quarter of the range accounts for 43.75% of the maximum.

Worked example#

Assume a pool NAV of 10,000,000 USD. This figure is illustrative only. The BTC OI cap is 30% of NAV, 3,000,000 USD, so the BTC skew cap is 1,500,000 USD.

BTC skew is currently +650,000 USD, net long. A trader opens a 100,000 USD Long premium position.

1. 1Skew after = 650,000 + 100,000 = 750,000 USD. It increases, so the charge applies.
2. 2Skew utilization = 750,000 / 1,500,000 = 50%.
3. 3Skew charge = 0.10% × 0.5^2 = 0.025%, which is 25 USD.
4. 4Base fee = 0.05% × 100,000 = 50 USD.
5. 5Total fee = 75 USD, of which the 25 USD skew charge goes entirely to the pool.

If the same trader instead opened a 100,000 USD Short premium position, skew after would be 550,000 USD. The imbalance falls, so the trader pays the 50 USD base fee only.

Parameters#

See Fees for the full trader fee schedule and Governance process for how parameters change.