Market Mechanics
Introduction to P2P Futures Trading
BigShortBets P2P Market enables direct futures trading between participants, meaning that the platform itself does not act as a clearinghouse. Instead, it provides a marketplace where two counterparties can connect and open positions with each other.
Trading futures in a fully P2P setup brings some unique characteristics and contrasts to trading on traditional exchanges.
Instruments
The P2P architecture allows for the creation of futures markets on virtually any asset for which a reliable data source (oracle) is available.
Our core focus is to offer fully P2P futures trading on contracts that mirror those available on major global futures exchanges. Trading is open 24/7, including on markets that mirror contracts from leading futures exchanges, regardless of their operating hours and oracle updates. These markets follow the same expiration schedule as traditional futures markets. More about Round-The-Clock Trading.
Order Matching
Order matching is performed by an external matching engine to maintain the platform’s fully P2P structure, ensuring no centralized facilitation of positions.
The order book is distributed across nodes, which reach consensus on its current state.
All orders are limit orders, meaning participants specify the maximum price they’re willing to pay (for buyers) or the minimum price they’re willing to accept (for sellers).
The engine matches buy and sell orders for futures contracts using a Dutch auction approach, matching orders and creating positions based on the first available offer that meets specified criteria, without seeking an "optimal" match across the entire order book, as traditional exchanges do.
Orders that meet each other’s criteria are matched into a position at the maker's or taker's order price, depending on which is closer to the oracle price.
Positions are not consolidated, merged or averaged.
No Best Price Guarantee
Due to the nature of the order matching process, execution is not guaranteed at the best currently available price in the order book, but rather at the user-specified price.
For instance, when a buy order is placed at a specified price, it will match with available offers at that price, without automatically prioritizing lower-priced offers.
Ability to Trade at Any Price
This system allows users, with sufficient margin, to trade at any price—regardless of its distance from the oracle price.
If buy and sell orders are too far from the oracle price relative to the initial margin—such that matching them would result in immediate liquidation for one side—those orders are not matched and remain in the order book.
Contract Expiration and Settlement
Contracts in BigShortBets P2P Market follow a defined lifecycle, ending at contract expirartion. Here’s how it works:
Contract Expiration
Each contract has a specific expiration date and time, often aligned with those offered by leading futures exchanges. Near expiration, the display will switch from days to hours/minutes, shown in UTC. At the moment of expiration, trading on that contract halts.
After Expiration
There’s a 24-hour window for manually settling open positions using the Mark-to-Market (MTM) function. If MTM is not used within this period, the system will automatically settle positions based on the oracle price.
Pressing the MTM button after the market closes will settle and remove the position from the active list.
All funds held in the market margin are automatically transferred to the wallet after the final settlement of the contract.
Once the contract is settled, it’s marked as closed but remains visible for historical tracking.
Open Orders After Market Closure
Opening or closing orders for expired contracts will not be automatically canceled. Orders can be manually canceled to free up reserved funds tied to those orders.
Contract Rollover
Positions do not roll over to a new contract upon expiration.
Liquidation
When the collateral (Market Margin) provided by the trader falls below the maintenance margin required in the contract details, the position enters liquidation. In this process, the system first attempts to find a replacement counterparty in the order book to assume the position for the trader who is in profit. If a suitable counterparty is available, the position is transferred seamlessly.
Insufficient Liquidity in the Order Book
When there is no available liquidity in the order book to replace the liquidated position, the profitable party has the option to close the position after collecting any available profit from the liquidated counterparty.
Profit Limitation by Counterparty’s Market Margin
In cases where there is no additional liquidity to replace a liquidated party, the maximum profit for a position is limited by the Market Margin of the opposing party. Even if the market moves significantly in favor of the profitable trader, their gains cannot exceed the available collateral of their counterparty.
Mark-To-Market
On traditional futures exchanges, mark-to-market (MTM) is typically carried out at the end of each trading day, adjusting positions to the current market value during the daily settlement. However, on BigShortBets’ P2P market, MTM is available on-demand due to the decentralized, user-to-user trading model, where BigShortBets does not act as a clearinghouse. When a user initiates MTM, the position is adjusted at the current oracle price, transferring funds between counterparties’ Market Margins according to the position’s PNL.
In certain cases, an MTM adjustment is also executed automatically. For example, when a user closes part of a position, an MTM adjustment is applied to the remaining portion at the same price.
Applying MTM to positions on a closed market settles and closes them, after which they are no longer displayed.
The Profit / Loss displayed in the Positions tab is calculated from the entry price to the current oracle price, without resetting at each MTM adjustment.
Balance and Margin Components
Total Balance
Represeent total account value, combining account balance and the unrealized PNL from open positions.
Market Margin
Represents the margin for all open positions within a given market.
When an opening order is placed, the Initial Margin amount is reserved. Once the order is matched and a position is created, the Initial Margin amount is deducted from Total Balance and is displayed as the Required Deposit in the Deposit tab and forms part of the Market Margin displayed for each market.
Traders can then add or withdraw additional margin as needed using Withdraw and Deposit tabs
When positions are settled through Mark-to-Market (MTM), profits or losses are either credited to or deducted from the Market Margin
When all positions in a given market are closed, any remaining funds in the Market Margin are automatically withdrawn.
Market Margin = Initial Margins + Margin Deposited/Withdrawed + Realized PNL
The level of margin for open positions in a given market, represented by Market Margin, is visually displayed using colors that correspond to the following ranges:
Total Margin
Displayed as a component of Total Balance, it represents the sum of all Market Margins.
Unsettled PnL
Represents the profit and loss from open positions that has not yet been realized through Mark-to-Market (MTM) adjustments.
Open Orders Margin
Represents the total funds (initial margins) reserved for all pending opening orders.
Profit / Loss
Profit / Loss displayed for positions is always calculated based on the oracle price, regardless of any amounts realized through MTM.
Security & Compliance
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