Coinbase International Exchange Trading Rules

These rules apply to the extent Coinbase Bermuda operates a central limit order book trading platform and settle trades in a number of digital asset trading pairs. Each Customer’s account will list which order books are available to the Customer. In order to maintain integrity on the Exchange, a number of Exchange Rules will be implemented. The primary Exchange Rules are listed below, are subject to change based on Coinbase Bermuda’s determination, and are not limited to the below.

1.1 Coinbase operates a central limit order book trading platform, and settles trades in a number of Digital Asset Trading Pairs. Each Trader’s Account will list which Order Books are available to the Trader.

1.21 To place an Order on an Order Book, a Trader must have an Available Balance/Collateral of a relevant Asset in their Account which is sufficient to cover the total value of the Order plus any applicable fees.

1.22 When a Trader places an Order, that quantity of the relevant Asset becomes subject to a Hold.

1.23 A Trader can place an Order as a Market Order, Limit Order, Take Profit Stop Loss, or a Stop Limit Order 

1.24 A Trader may cancel an open Limit Order, Take Profit Stop Loss, or a Stop Limit Order. No fees are charged for canceled Orders.

1.31 A Limit Order is an Order to buy or sell a specified quantity of an Asset at a specified price.

1.32 A Limit Order will only Fill at the specified price or a better price.

1.33 A Limit Order will be immediately posted to the Order Book (subject to any Time in Force Instructions) and can result in a Maker Order or a Taker Order, or an Order that is partially a Maker Order and partially a Taker Order.

1.34 Limit Orders may be placed with one of the following Time in Force Instructions.

1.41 A Market Order is an Order to buy or sell a specified quantity of an Asset at the best available price of existing Orders on the Order Book.

1.42 There is no guarantee that a Market Order will Fill at the price specified. A Market Order may Fill at a number of different prices, based on the quantity of the Market Order and the quantities of the existing Orders on the Order Book at the time.

1.43 Depending on the volume and prices of Orders on the Order Book at the time when a Market Order is posted, the Market Order may Fill at a price less favorable than the most recent trade price, in some cases significantly so. This is commonly referred to as ‘slippage’.

1.44 A valid Market Order will be immediately posted to the Order Book. A Market Order is always a Taker Order.

1.51 A Stop Order is an instruction to post an Order to buy or sell a specified quantity of an Asset but only if and when the mark price on the Order Book equals or surpasses the Stop Price.

1.52 Once a Stop Order has been placed, it is considered ‘active’ until it executes by posting the relevant Order when the Stop Price is triggered.

1.53 A Stop Order is not posted to the Order Book and is not visible to other Traders, but any resulting Order is posted and visible. 

1.54 A Stop Order must be placed as a Stop Limit Order which posts a Limit Order when the Stop Price is triggered.

1.55 A Stop Limit Order is not guaranteed to Fill. The Web Interface will display a warning each time a Trader attempts to place a Stop Order.

1.56 Take Profit Stop Loss Order is a Limit Order to buy or sell a specified quantity of an Asset at a specified price, with stop limit order parameters embedded in the order. Take Profit Stop Loss Orders functions the same way as a Limit Order, but if the stop price is triggered before an execution on the original Limit Order, the original Limit Order will be repriced to the stop limit price. If the original Limit Order is partially filled, the stop price and stop limit price will not be triggered, and the open portion of the Limit Order will remain at the original Limit Order price.

1.57 Stop Orders may be placed with one of the following Time in Force Instructions.

1.61 Limit Orders and Stop Orders are subject to a price protection point (PPP). Limit and Stop Orders will fill at prices up to the PPP from the mid-point price between the best bid and best offer on the Order Book at the time the Order was placed. If a Limit or Stop Order would fill against Orders beyond the PPP, the Order will partially fill up to the PPP level and the matching engine will cancel all remaining portions of the Order.  

Order Size Limits

1.62 Order Minimums: All Limit Orders and Stop Orders placed on Coinbase Markets may be subject to the minimum order size requirements listed here. 

1.63 Updating Order Parameters: Coinbase Markets will periodically update our market parameters to reflect the current state of our marketplace and the notional value of the assets. 

1.71 Coinbase Markets matches Taker Orders with Open Maker Orders on each Order Book based on Price-Time Priority.

1.72 Price-Time Priority means that each time a Taker Order is posted: The Taker Order is matched with the earliest in time Maker Order at the best price on the Order Book; and To the extent that the Taker Order is not completely Filled by that Maker Order, it is matched with any subsequent Maker Orders at that price, in the sequence those Maker Orders were posted; and To the extent that the Taker Order is not completely Filled by one or more Maker Orders described above, it is matched with one or more Maker Orders at the next best price, in the sequence those Maker Orders were posted, and this process is repeated until the Taker Order is completely Filled.

1.73 All Traders on accessing Coinbase Markets are subject to the same Price-Time Priority.

1.74 Subject to Time in Force Instructions, an Order may be matched with a number of corresponding Orders at the same price.

1.75 Taker Orders are matched with the best available existing Maker Orders. This means that a Limit Order placed outside the market (i.e. a sell Order below the highest existing buy Order, or a buy Order above the lowest existing Sell Order) will be Filled by the best available existing Order rather than an existing Order with the same price as the Limit Order.

1.81 When a Maker Order is matched with a Taker Order, those Orders are Filled. An Order may be matched with and Filled by one or more Orders at the same price.

1.82 Coinbase Markets settles all Filled Orders immediately, by debiting and crediting the relevant balances of Assets in both Traders’ Accounts.

1.83 Subject to daily withdrawal limits a Trader may immediately withdraw all Assets in their Account.

1.91 The estimated fees charged by Coinbase Bermuda to customers are summarized below. As per the purposed User Agreement provided in support of the Application, applicable fees are published on website [https://help.coinbase.com/en/international-exchange/trading-deposits-withdrawals/international-exchange-fees] at any given time:

1.92 Fees for Perpetual Futures trading will range from 0 to 60 bps and will vary according to whether the user is a maker or taker. 

All Trades are Final

2.1 Coinbase Bermuda intends to provide Customers with access to digital asset derivative, spot margin and spot market products. The exchange applies various risk management practices to prudently manage the risks to which it is exposed, including market, credit, and liquidity risks. Some of the risk management practices include: 

2.12 All Fills are final and will not be reversed unless:

2.13 Coinbase may cancel Open Orders in the following circumstances:

2.21 All Traders have equal access to the Coinbase APIs and Web Interfaces. Coinbase does not provide prioritized access to any Trader.

2.22 Coinbase Market Operations has the authority to take any action deemed appropriate to preserve market integrity. Such actions include, but are not limited to, the halting of trading, modifying risk-mitigating parameters, restricting Trader access to Coinbase Bermuda, restricting order types to limit only, canceling orders resting in the order book, or any other actions deemed to be in the best interest of the Exchange.

2.23 Traders participating as RFQ Liquidity Providers and responding to RFQs must ensure quotes adhere to the following rules to avoid rejections: (a) all required fields must be present in the quote message, and (b) quote response must be received before the expiration time indicated in the RFQ. A RFQ Liquidity Provider's bid and offer response to a RFQ shall be accompanied by the number of Assets at that price the RFQ Liquidity Provider is willing to buy or sell. A RFQ Provider may enter either a bid or an offer or both in a quote response. Every RFQ message issued, and every RFQ Liquidity Provider responsive quote, must be for an initial minimum size of at least one (1) Asset. RFQ Liquidity Provider bids and offers are firm for all orders for the number of Assets specified in the bid and offer for the time indicated in the RFQ. Bids and offers are not firm if: (a) a system malfunction or other circumstance impairs Coinbase’s ability to disseminate or update market quotes in a timely and accurate manner; or (b) during the pre-opening phase. Coinbase reserves the right to revoke a Trader's status as a RFQ Liquidity Provider and participation in the RFQ program if the above criteria are not met, if it believes the RFQ Liquidity provider is not participating in good faith, or if it deems it to be in the best interest of the Exchange.

2.31 If technical reasons prevent or degrade Traders’ ability to place or cancel Orders, or prevent or degrade access to Coinbase APIs or the Web Interfaces or affect the operation of Coinbase Markets Order Books or matching engines, then Coinbase may, in its discretion, take one or more of the following actions in respect of one or more Order Books;

2.32 If Coinbase Bermuda is in Trading Paused Mode, it will be restored to fully operational only after access through the Web Interface becomes available for at least 5 minutes and Coinbase deems it is safe to restore Coinbase Bermuda to fully operational.

2.33 Coinbase will notify Traders of the move to or from Trading Paused Mode via Coinbase Twitter handles and Status Page. 

2.41 Traders are not able to place an Order which would result in self-execution—i.e., where the same Trader would act as both the maker and taker for the trade.

2.42 If two Orders of the same quantity would result in self-execution, both Orders are canceled.

2.43 If two Orders of different quantities would result in self-execution, the smaller Order is canceled and the larger order is decremented by an amount equivalent to the smaller quantity. The remainder of the larger order remains Open.

2.51 Coinbase Markets does not use circuit breakers or automated trading halts based on predetermined price bands. As provided in Section 2.22 and 2.31, Coinbase Market Operations may, in its discretion, halt trading.

2.61 Traders are prohibited from engaging in Market Manipulation.

2.62 Market Manipulation of any kind is strictly prohibited. Market Manipulation is defined as actions taken by any market participant or a person acting in concert with a participant which are intended to:

2.63 Market Manipulation specifically includes, without limitation: front-running, wash trading, spoofing, layering, churning, and quote stuffing.

3.1 All Traders have full and equal real-time access to Market Data. Market Data is made available through the Web Interface or the Coinbase API.

3.12 Market Data comprises the following:

3.13 Market Data does not include the following:

3.21 Coinbase policies prohibit all Coinbase employees from using inside, corporate or proprietary information to trade Digital Assets.

3.22 Coinbase employees are required to trade Coinbase supported assets on Coinbase products subject to Coinbase’s employee trading policy and trade surveillance program.

4.1 From time to time, Coinbase may suspend trading temporarily for maintenance or upgrades. Absent extenuating circumstances, Coinbase Bermuda will follow this process for closing and re-opening trading;

Step 1: Announce Scheduled Downtime

Step 2: Scheduled Downtime Begins

Step 3: Immediately after Scheduled Downtime is Completed

Step 4: At least 1 minutes after Step 3; or longer if necessary

Step 5: At least 10 minutes after Step 4; or longer if necessary

In these Coinbase Markets Trading Rules, the following words and phrases have the corresponding meanings.

Coinbase Markets is Coinbase's set of limit order books that are accessed by clients through the Coinbase International trading platforms. The following set of Trading Rules governs orders placed via these trading platforms.

Futures

Coinbase International Exchange will set Initial Margin Requirements for all traded contracts on the exchange. Initial Margin Requirements represent the amount required to place an order for a given contract based on real-time market conditions, including liquidity and volatility, to ensure sound risk management of the overall exchange. Coinbase International Exchange may at its discretion change the Initial Margin requirements including the rate used to determine the Initial Margin requirement at any time, without notice, due to factors such as market conditions.

A customer must, at all times monitor its margin requirements and, where its margin balance falls below Initial Margin requirement immediately either:

Portfolio Initial Margin (“PIM”) Portfolio Initial Margin (“PIM”) is a weighted average of Initial Margin values across the portfolio, utilizing the cost basis to determine the notional value of the futures positions.

Maintenance margin (“MM”) represents the minimum amount of margin required prior to an orderly liquidation. If Current Margin (or account equity) is below the maintenance margin requirement, the liquidation engine will take over the account and perform an orderly liquidation, and customers will be locked out of the account until processing is finished. Coinbase International Exchange may at its discretion change the Maintenance Margin requirements including the rate used to determine the Maintenance Margin requirement at any time, without notice, according to factors such as market conditions.

The MM for any given asset is not used in isolation, rather it is used to compute the portfolio wide maintenance margin. A portfolio will be liquidated when the CM falls below the aggregate value. Portfolio Maintenance Margin (“PMM”) determines the weighted average maintenance margin for a given portfolio. If the portfolio’s Current Margin falls under the PMM, the portfolio will start being liquidated.

Close out Margin (“CoM”) represents the margin threshold where actions take place through Liquidity Support Provider Program and the Insurance Funds. Coinbase International Exchange may, at its discretion, change the Close out Margin requirements including the rate used to determine the Close out Margin requirement at any time, without notice, due to factors such as market conditions.

A smoother and more robust representation of the market price, which has the risk of being manipulated.

There is also a concept of Fair Value, which is a price that confirms that our CLOB (central limit order book) is in line with the global index. This concept allows us to avoid unnecessary liquidations, caused by our markets being illiquid, high price swings on Bermuda Exchange compared to the global index price of that particular asset.

This can be described by the formula below: 

The Fair Value is a calculated price that anchors the CLOB Mark Price within a specified range of the Spot Index price and impacts execution of orders and liquidations. When the CLOB Mark Price goes out of the range of either the Fair Order Execution Threshold or Fair Liquidation Execution Threshold, the order or liquidation order will not be executed, and will only be executed once the CLOB Mark Price is within that range.

Funding introduces periodic payments where the trader will either pay or receive Funding fees. The Funding fee is based on the difference between the perpetual futures and spot price, and the size of the long or short position. Funding fees are only applicable for users who have an open position when the Funding interval ends, and the timing of when the position was established is not considered as a factor. If the user closes their position prior to the funding interval ends, then the user will not be paying or receiving Funding fees. Also, the funding fee is paid/charged according to the funding rate and the users live positions at the time it ended.

Therefore, when a Funding interval ends, all open perpetual futures positions will pay or receive Funding fees. And Funding fees are calculated using the Funding Rate and Position Value, and the equations are as follows:

Where Position Value is a product of Quantity of the asset (i.e. BTC, ETH) and the Mark Price of the futures market. 

Funding fee payments will show in the user’s deposits/withdrawal history. 

Funding Rate

Funding rate represents the difference between the mark price of the perpetual futures market and the Index price, which is equivalent to the Spot market. When the absolute value of the funding rate is larger, the difference between the two prices are wider. 

When the Funding Rate is positive, users who have long positions pay users who have short positions. When the Funding Rate is negative, users who have short positions pay users who have long positions. 

Settlements of Funding happens every hour, where the settlement price is calculated using a Time Weighted Average Price (TWAP) of the Index Price within an interval of 1 second. 

Mark Price 

The Funding Rate is calculated by the following equation:  

Precision for Funding Rates will be capped at 6 decimal places.

Where the Premium is calculated using the following equation:

Funding Rate intervals will be the same for all perpetual futures products.

Funding Fee Payment 

All settlements will be done in USDC, so all Funding fee payments will be paid and received in USDC. 

The Index Price is the mark price of an index that consists of a bucket of prices from the major Spot Exchanges that trade the particular asset. The index feed is meant to provide a real time view of underlying cryptocurrency prices across trading venues. It is used for the settlement and margining of perpetual futures contracts.

Definitions

Derived Market Price (DMP) = Median(last trade price, last best bid, last best offer) for each venue

Median Derived Market Price (MDMP) = Median(DMPs)

Quality checks

Computation

Index = Average(DMPs) post checks. 

Data Publishing

The index price feed will be made available through a streaming transport with the ability to request latest snapshots and streaming updates. The index price will be updated every 1s. 

Mark to Market (MTM), which is evaluating the value of portfolios over time, will happen at a frequency of 1 second. Each asset and market will go through this process, where all portfolios with active positions will go through a process of recalculating the position exposure and unrealized profit & loss. Calculation of the MTM will be using the CLOB Mark Price. 

The Mark to Market will be used to calculate unrealized PnL, flag portfolios violating margin requirements, and trigger any liquidation procedures for flagged portfolios. 

The exchange settles trades every 5 minutes by determining a settlement price and applying it to all positions. This ensures that unrealized profits or losses do not accumulate, reducing risk for customers and the platform. Collateral balances are adjusted based on gains or losses from the settlement price. All settlements on Bermuda Exchange will be done in USDC. 

Users will be able to withdraw funds from the platform, which include unrealized PnL.

Settlements will be a combination of the following:

Portfolios will go through a Mark to Market every 1 second.  

The threshold for portfolio selection is:

[WCS Quantity = Size of Existing position + Size of position for existing open orders + Size of positions for new entered order]

2. Price bands: This control will ensure the price impact for a new order does not exceed the FUTURES_PRICE_BAND_LIMIT for futures orders (on the opposite side of the order book). 

3. Note: If the new order would cause a price impact to be greater than the defined threshold, 1.5%, the entire order is rejected. 

4. Maximum position limits: Coinbase International Exchange sets position limits for all customers and instruments. Coinbase International Exchange may at its discretion change position limits at any time, without notice, according to market conditions.

5. Locked account: An account is placed in lock status when the account equity is below certain thresholds. Traders cannot: 

Accounts that have Current Margin equal to or less than Maintenance Margin will be partially liquidated via the Coinbase International Exchange liquidation engine in the order book. Customers will be unable to enter orders as the liquidation engine partially closes positions to bring account health back in good standing. Customers can deposit more funds that are acceptable as collateral to bring account health back in good standing.

Accounts that have Current Margin equal to or less than Close out Margin will have positions assigned to Liquidity Support Provider participants outside of the order book.

Auto deleveraging occurs when Liquidity Support Provider capital is exhausted and accounts are below Close out Margin. Liquidated futures positions are matched against opposing traders, based on largest position size, and closed.

The purpose of the Insurance Fund is to cover client accounts with negative equity. In the event of liquidation, if the liquidated order is closed at a price worse than the bankruptcy price, the Exchange will use the balance of the insurance fund to cover the loss. If the insurance fund is insufficient, clawbacks will be triggered. During liquidation, the balance of the insurance fund will increase/decrease depending on the difference in price between the final executed price and the bankruptcy price of the liquidated position.

Clawbacks occur when the insurance fund is depleted and accounts being liquidated have negative equity. 

Conversion Process: When the underlying pre-launch future token is launched on applicable spot exchanges and the market meets our requirements for a standard perpetual future, Coinbase will begin converting the pre-launch market to a standard perpetual future market. For more information on Pre-Launch Futures products, please visit our help centre.

The following information outlines the process that Coinbase International Exchange will follow for the delisting of perpetual futures contracts.

19.1.1 Public Announcement

Coinbase will issue a public announcement via the below designated channels:

The announcement will specify the key dates and specific delisting details:

19.2.1 Trading Suspension

At the Trading Suspension & Final Settlement Time, the following actions occur:

19.2.2 Final Settlement

All open positions are closed using the Final Settlement Price, calculated as the average Index Price from the last 60 minutes leading up to the Trading Suspension & Final Settlement Time.

Customers who do not close positions before Trading Suspension and Final Settlement Time will be subject to automatic settlement at Final Settlement Price.

19.3.1 Default Settlement Price

The Default Final Settlement Price is the average Index Price calculated over the last 60 minutes prior to the Trading Suspension & Final Settlement Time. (Please be advised that the funding rate will be set to 0 before the final settlement period begins, so there is no funding payment at settlement).

19.3.2 Discretionary Adjustment

Coinbase reserves the right to adjust the methodology or time period used to calculate the Final Settlement Price in cases of market abnormalities or other extenuating circumstances.

Coinbase reserves the right to suspend trading at any time, either on or before the scheduled Trading Suspension & Final Settlement Time, in cases of unexpected market conditions, technical issues, or any other reason Coinbase deems necessary to protect market integrity as provided in rule 2.22.

Standard trading fees apply to positions that are automatically settled during the delisting process.