Price Impact and Variable LP Fee

The price impact refers to the effect that a trader's order has on the price in the futures market.

Larger orders can cause movements, affecting execution prices and overall trading costs. As liquidity on the platform increases, the price impact of individual orders tends to decrease.

The protocol gives larger rewards to Liquidity Providers for deeper price impact.

Hence the formula for variable fee component: Variable LP Fee = Var. LP Fee Factor * Price Impact

When calculating fees, always consider the price impact of your order. As platform liquidity increases, the market impact of individual orders tends to decrease. Traders should be mindful of slippage and liquidity when placing large orders.

Everyone can see the liquidity and manage their positions consequently